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Baltimore Officials Claim Criminal Indictment Not Grounds to Disqualify $67.3 Million Reliant Energy Contract

July 16, 2004

Baltimore Officials Claim Criminal Indictment Not Grounds to Disqualify $67.3 Million Reliant Energy Contract

Public Citizen Renews Call for City, County Officials to Review Controversial Contract

WASHINGTON, D.C. – Baltimore city officials deemed Reliant Energy Solutions East a “responsible bidder” when it awarded the company a $67.3 million contract to provide electricity, according to correspondence with Public Citizen, which urged the city to revoke the contract because of its close corporate relationship with a sister company under indictment for manipulating West Coast energy markets.

“Corporations should not be able to avoid accountability for their actions by claiming that various subsidiaries are independent companies, when they are – like we saw with Enron – arms of the same energy holding company,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program. “We have documented that the entity awarded the contract is dependent on its indicted affiliate to fulfill its obligations to Baltimore.”

Reliant Energy Services was indicted by a federal grand jury in April for allegedly shutting down power plants to increase energy prices for California consumers during 2000 and 2001. Both it and Reliant Energy Solutions East, which received the Baltimore contract, are subsidiaries of Reliant Energy Inc., which has agreed to pay $125 million to settle related civil charges that its subsidiary manipulated natural gas and electricity markets during the California crisis.

On June 2, Public Citizen first urged Baltimore officials to reevaluate – and revoke – its contract with Reliant. However, in a response dated June 30 from the Baltimore County Office of Budget & Finance and the City of Baltimore, officials said they “have no basis to deviate from our responsibility concerning the award of the contract to the lowest responsible bidder.” The letter further notes that Public Citizen had “not identified anything that disqualifies Reliant Energy from participation in this competition or from being awarded this contract.”

Under Maryland law, a procurement officer must reject a bid if the bidder is not deemed “responsible” or does not have “integrity and reliability that will ensure good faith performance.” 

Public Citizen believes that the criminal indictment and settlement agreements raise legitimate questions about Reliant’s integrity – especially since Public Citizen provides documentation in a letter today to Baltimore officials outlining how the company awarded the contract is dependent upon its indicted affiliate to fulfill the contract’s obligations.

“This rationale is troubling,” Hauter said. “It implies that the city of Baltimore can exercise no discretion over the types of individuals and businesses to which it gives the taxpayers’ money.”

Further, the federal government also found Reliant’s actions troubling enough to warrant an investigation of the contract it gave the company on May 19 to provide electricity to several military installations. On July 14, a House‑Senate conference committee unanimously inserted language into the Department of Defense appropriations bill ordering a review the $36 million contract it awarded to Reliant.

Public Citizen’s review of documents filed with federal regulators shows an interdependent relationship between the two Reliant subsidiaries. Not only do they share several top officers, the indicted subsidiary conducts most of its operations in the Maryland region and sells significant quantities of electricity to Reliant Energy Solutions East.

At least two other companies, PEPCO Holdings Inc. and WGL Holdings Inc., submitted competitive bids for the Baltimore contract.

To read today’s letter from Public Citizen to Baltimore county and city officials, click here. To read the letter from Baltimore county and city officials to Public Citizen, click here. To read about Reliant Energy, click here.