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It is time to get tough against the Energy Cartel

Thursday May 10, 2001

By Lt. Governor Cruz M. Bustamante 


Power producers are robbing our state of its economic future.  

That is why I have filed a lawsuit on behalf of California’s taxpayers against the “big five” out-of-state energy producers. They have violated our state’s antitrust and unlawful business practices laws by manipulating the energy market through price-fixing schemes. It is time they are held accountable for ransacking our state and forced to return their illegally collected fortunes. 

This cartel of five out-of-state corporations, Duke, Mirant, Reliant, Williams and Dynegy control the critical 19 gas-fired electric generation plants, located in 11 California counties, that provide critical amounts of electricity to the state’s consumers. The cartel appears to have engaged in unlawful trading practices to manipulate the market, and gained unrestrained monopoly power over electricity prices in California.  

The numbers are staggering. 

The price of power has increased ten-fold in just two years – from $7 billion in 1999 to a projected $70 billion this year. The Independent System Operator (ISO) estimates that California has been overcharged by billions of dollars. Even the Federal Energy Regulatory Commission (FERC), which has been appallingly negligent on California’s behalf in this crisis, stated that the cartel has overcharged Californians by tens of millions of dollars. 

As published reports show, the big-five companies unlawfully acted like a monopoly 98 percent of the time they sold power to California’s consumers. They increased prices by jamming the electric transmission lines with excess electricity, and also engaged in a “withhold-and-bid” scheme designed to create false shortages of supply at crucial periods.  

These are funds that should be invested in our schools and children instead of lining the pockets of this energy cartel. 

Billions of dollars that could have gone to textbooks, uninsured children, police, teachers, after schools programs, economic development, affordable housing and other needs in our state are instead being siphoned out-of-state, bankrupting our businesses and burdening working families. 

It is critical that we ensure that these power generators are stopped from looting California taxpayers in the future. One way to do this is by criminalizing this type of behavior. 

I have sponsored legislation, which would make it a felony for energy suppliers to manipulate the market at the expense of our taxpayers. This measure is prospective -- targeting future abuses. 

Specifically, the legislation would put those who collude or conspire to manipulate the market behind bars. It would levy a fine of up to 10 percent of their corporate assets, create a whistleblower provision to protect individuals who provide information to authorities, and create a bounty hunter provision with a reward of $1 million for information which leads to an actual conviction. 

I am confident that once their illicit practices are exposed in a court of law, these companies will be forced to release California from our current energy-hostage situation and deal fairly with our state’s taxpayers. 

We must act now! If we do not, the cost is too high; seniors on fixed incomes will have to choose between air conditioning and food or medicine, small business owners will continue to struggle paying their bills and families will have to work that much harder. 

While the lawsuit and legislation will not solve all of our state's energy problems, they will stop the abusive behavior and get our money back. 

We’ve tried to reason, tried to deal, and tried to negotiate. We’ve had enough!  

We want our money back now!