California suit accuses electricity supplier of gouging

The lawsuit filed by Attorney General Bill Lockyer against BC Hydro's Powerex subsidiary represents the latest attack by state officials on the companies that sold power to California as prices soared.

The suit essentially accuses Powerex of shooting a sitting duck - namely, the state Department of Water Resources.

The state agency was so desperate for electricity in 2001 that it simply paid whatever price Powerex demanded, the suit says. The water agency began buying power for California's crippled investor- owned utilities in early 2001 and often had to scrounge for supplies at the last minute.

Powerex "took an oppressive and unfair advantage of the distressed created by the California energy crisis," says the suit, filed in Sacramento County Superior Court. As a result, its pricing practices violated California law, the suit says.

The suit also says Powerex "manipulated the California energy markets through Enron-style gaming and trading strategies."

Lockyer's spokesman Tom Dresslar said Powerex sold California about $1 billion worth of hydroelectricity in the first six months of 2001, before federal price controls kicked in. The state says Powerex overcharged California by about $850 million.

Powerex, owned by the government of British Columbia, has long acknowledged that it made a fortune selling electricity to California. But it said it should be thanked, not sued, for helping keep the lights on in California.

"We responded to the entreaties of the California government in their time of need, and this suit proves that no good deed goes unpunished," Powerex vice president Doug Little said in a prepared statement. He added that the lawsuit is "the height of bad faith" because California still owes Powerex $280 million for electricity deliveries.

In a proceeding with the U.S. government, Powerex agreed in October 2003 to pay $1.3 million to settle allegations of manipulating prices, but it didn't admit to any wrongdoing. Indeed, the Federal Energy Regulatory Commission said the evidence "demonstrates Powerex's reliability as a supplier and its contribution toward keeping the lights on in California."

California officials said the settlement was too small.

The state has obtained refunds of nearly $3.4 billion from energy suppliers. It argues that it was overcharged by a total of $9 billion and is still fighting in courtrooms and administrative proceedings for the rest of the money.