CRC blasts California suit

Kevin Rademacher

Thursday, May 19, 2005 | 10:37 a.m.

Officials with the Colorado River Commission are furious over a lawsuit filed Wednesday by California Attorney General Bill Lockyer.

The California lawsuit seeks damages against Canadian power trader Powerex Corp. and Public Service Company of New Mexico for manipulating electricity markets during the Western energy crisis. The lawsuit, however, also names the CRC as a co-conspirator.

"We were as surprised as anyone," said George Caan, executive director of the CRC.

The CRC is surprised because in August 2004 the state agency paid nearly $1 million to settle a Federal Energy Regulatory Commission investigation into its trading practices during the Western energy crisis.

The settlement included no admission or finding of wrongdoing, and CRC executives said at the time that the deal was reached in an effort to save the costs necessary to continue litigating the matter.

Caan said Wednesday that the California parties were involved in the FERC case and approved the 2004 settlement. The new action, however, could draw the Nevada agency back into litigation involving the energy crisis.

"If they had an issue they could have raised it in the settlement," Caan said. "They didn't object to the settlement ... It's just dragging us into something that's already been settled."

Attorneys from the commission are currently examining the lawsuit to determine what role they might play in the new litigation.

"We are going to be looking at this to determine what it means to be named in the document," Caan said.

The lawsuit claims that actions between the parties -- including the CRC -- were carried out to "restrain trade and to fix and maintain the price for electricity in California at artificially high levels. The market manipulation by Powerex, PNM and CRC violated applicable law and, in fact, did artificially raise the price of electricity within the state."

Among the activities in questions, the lawsuit claims, was the purchase of electricity in California by Powerex and -- through PNM and the CRC -- "its withdrawal from and subsequent re-importation into the California market."

"This manipulation of the supply of electricity caused the price to rise, and Powerex was able to sell it back into the California market at these higher prices," the lawsuit said.