Friday, Oct. 3, 2003 | 11:31 a.m.
SUN STAFF AND WIRE REPORTS
WASHINGTON -- Federal regulators approved a potential $50 million settlement Thursday with Reliant Resources Inc. over allegations the energy trader and producer manipulated Western electricity markets in 2000 by withholding power.
The agreement, in which Houston-based Reliant will pay $25 million in civil penalties and possibly a like amount in proceeds from auctioning off electricity, was formally approved by the Federal Energy Regulatory Commission.
The settlement amount will be placed into a fund that will be disbursed by FERC commissioners at a later hearing. Nevada officials will have a chance to argue the state's case for damages at that hearing, FERC spokesman Brian Lee said.
Nevada Power Co. has contested contracts with Reliant and eight other energy providers, claiming the deals were inflated by market manipulation during the Western energy crisis. The FERC has so far upheld those contracts, despite findings of manipulation.
Reliant also is currently building its 550-megawatt, Bighorn power plant near Primm, about 40 miles south of Las Vegas.
Reliant did not admit to any violations in the FERC agreement, but company chairman Joel Staff said in a statement, "Reliant must assume responsibility for its actions."
The settlement stems from charges by FERC that six Reliant subsidiaries -- Reliant Energy Services Inc. and five California-based generating companies -- engaged in manipulative bidding practices from May to October 2000, including the withholding of electricity, driving up power prices in California.
"Today's settlement should serve as a warning to all energy companies that attempts to manipulate energy markets will have consequences," FERC Chairman Pat Wood said in a statement.
Wood said he expects other companies to follow Reliant's lead and settle allegations stemming from improper practices during the California electricity crisis in 2000 and 2001. During the time wholesale electricity and gas prices skyrocketed across the West.
Reliant previously agreed to pay $13.8 million in connection with separate charges stemming from alleged abuses of California's electricity market in June 2000.
The latest agreement also settled Reliant's involvement in three questionable power trades between Reliant and BP Energy at the Palo Verde trading hub in Arizona. BP Energy previously had agreed to a $3 million settlement involving those trades.
FERC said that the settlement concludes its investigation of Reliant in connection with the alleged withholding of electric power in California. The company has reached a separate tentative agreement over alleged Enron-like market practices during the Western energy crisis. That agreement has yet to be approved by the FERC.
Staff, Reliant's chairman and chief executive officer, said in a statement issued in Houston: "We intend to conduct our business in a fashion that not only meets the letter and spirit of the law, but also sets a standards of excellence based on the highest ideals of corporate responsibility.
"Resolving the issues related to California continues to be a major goal of Reliant. We are continuing to review the events of 2000 and 2001 in an effort to resolve any other outstanding issues."
California Gov. Gray Davis criticized the settlement, calling it "chump change."
"Reliant ripped California ratepayers off for billions of dollars and FERC slaps them on the wrist," Davis said in a statement. "What incentive is there for generators to play by the rules if they can get away with this?"
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