Many contributed to state energy crisis

California wants FERC to order $8.9 billion in refunds for 2000 and 2001, when power prices soared and the state faced energy shortages and rolling blackouts.

The generating companies, both public and private, engaged in systematic withholding, a draft of the summary says, according to a source who had seen the document.

The evidence, the draft document says, shows that gaming the California market and withholding power from the market was the rule, not the exception, in 2000 and 2001, said the source, who asked to remain anonymous.

When power plants have outages, operators have to disclose certain data to grid managers, some of which is kept confidential. The state believes it has evidence that "a number of generators were sharing that nonpublic information," the source said. "That's also known as collusion."

A FERC administrative law judge found in December that California should get $1.8 billion in refunds, but also determined that energy companies were owed $3 billion from unpaid bills for power delivered to the state.

The FERC rules wouldn't let the judge consider $3.4 billion in claims from the California Department of Water Resources, which stepped in to buy power for the near-bankrupt utilities in 2001. The state has appealed that ruling.

Wholesale prices in California shot up in May 2000, but the judge's findings, based on complex formulas, covered power transactions from October 2000 to June 2001. Those findings didn't take into account evidence of market manipulation.

California appealed and FERC gave the state 100 more days to compile evidence of price gouging.

The state's evidence was culled from "literally millions of pages of documents," said Eric Saltmarsh, general counsel for the Electricity Oversight Board, one of the state agencies involved in the FERC case.

"It is representative, not exhaustive," Saltmarsh said. "We had 100 days and more than 100 companies to look at. We do not pretend for a moment that we have dragged the net through the entire world."

Still, he said, what the state has found "makes that case pretty compellingly" that energy companies took advantage of the state's newly deregulated power market.

Energy companies have largely denied wrongdoing.

Reliant Energy agreed in January to refund $13.8 million to settle claims that employees withheld power for two days to drive up prices. Houston-based Reliant admitted no wrongdoing, saying the June 2000 actions were "an isolated situation."

Some of the evidence the state will turn over will include documents already made public, such as the Enron memos that outlined gaming strategies with colorful names like "Get Shorty," "Ricochet" and "Fat Boy," Saltmarsh said.

The Enron memos indicated that other companies had similar strategies, but provided no details.

Investigators found "relatively few instances of people confessing," as in the Enron memos, but a wealth of the other evidence, Saltmarsh said.

For example, analysts combed through data examining how many megawatts of electricity a company bid on a certain day, then looked at how much energy was actually delivered, he said. Scheduling too much electricity can give the impression that a transmission line is congested, driving up the price of electricity -- a strategy that Enron is accused of using.

"The only piece we're missing is what they called it in their company," Saltmarsh said.<