Energy lawsuit alleges scheme

By Jim Haley

Herald Writer

Snohomish County PUD customers could reap millions of dollars from a lawsuit filed in California alleging a conspiracy by power marketers and producers to jack up power costs in the winter of 2001.

The class-action lawsuit was filed Monday under California law in San Francisco Superior Court.

One of the first big steps in the lawsuit will be getting class-action status from the California court, said Seattle lawyer Steve Berman, lead attorney. A single Snohomish County ratepayer, Donna G. Hansen, now is named as the only plaintiff.

Defendants include more than a dozen marketing companies and power producers doing business in California, plus dozens of other unnamed companies and individuals.

The intent is to seek class-action status and go after repayment of hundreds of millions of dollars spent by 21 Washington public utility districts. The PUDs paid sky-high power costs as a result of market manipulation, said Berman, a managing partner with the law firm Hagens Berman.

The spike in power prices last year cost Snohomish County PUD customers alone an extra $300 million in inflated contracts, PUD spokesman Neil Neroutsos said. That’s about $1,100 per customer.

Interim PUD general manager and corporate counsel Michael Gianunzio on Monday said the lawsuit "is encouraging and good news. Hopefully it can be sustained and the consumers of the Northwest, including those of the Snohomish County PUD, can get some money out of this."

He blamed an 18 percent rate hike here on inflated power costs.

The lawsuit alleges the companies conspired to drive up power costs by creating artificial shortages during last year’s energy crisis and "reaped billions of dollars in ill-gotten profits," according to a press release issued Monday by Berman’s law firm.

Defendants include Williams Electric Marketing, Mirant Corp., Reliant Energy Services, Duke Energy Trading, Dynegy Power Marketing. Sempra Energy Resources, Enron Energy Services and Morgan Stanley Capital Group Inc.

The PUD is involved in a Federal Energy Regulatory Commission complaint against Morgan Stanley asking for invalidation of a $100 million contract signed in January 2001. The utility claims the contract price is five times what it should be.

Late last year, it also pulled out of a second contract with Enron, although there’s now a dispute over whether the PUD must pay a termination penalty.

This is the first legal action seeking damages for ratepayers outside of California, Berman added.

According to the complaint, the defendants own or control 19 gas-fired electric generation plants in California. It alleges the companies created a cartel to withhold power from the electric market, creating a shortage and causing the price of power to spike.

It also alleges the defendants engaged in a series of transactions designed to inflate the cost of energy.

Gianunzio said the utility wants to recoup some of the money.

"We’re taking a hard look at how we can participate in any proceeding, including this (lawsuit), to get relief to our customers from the rip-off that these power marketers were doing back in the winter of 2001," Gianunzio said.

You can call Herald Writer Jim Haley at 425-339-3447 or send e-mail to haley@heraldnet.com.

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