Feb. 5, 2003
Federal Regulators Let Corporate Criminals Go Free
Reliant Energy Slapped on Wrist for Manipulating California Market; Transcripts Reveal Traders Thought Causing Blackouts Was “Coolest Strategy Ever”
Statement by Wenonah Hauter, Director, Public Citizen’s Critical Mass Energy and Environment Program
Friday’s decision by the Federal Energy Regulatory Commission (FERC) to let Reliant Energy off the hook for bullying 55 million people during the West Coast energy crisis of 2000-2001 is criminal. Instead of revoking the company’s right to charge market-based prices, FERC issued a $13.8 million fine — an amount equal to 0.03 percent of Reliant’s 2001 revenues of $40.8 billion. This radical decision by the same commissioners who were in charge while Reliant and other companies held Americans hostage proves that the out-of-touch commissioners have no interest in punishing evildoers and deterring future energy crises.
The commission should be ashamed of itself. Its members’ actions smack of crony capitalism. In a 36-page transcript posted on FERC’s Web site, Reliant’s energy executives said it was “cool” and “fun” to manipulate the market and cause blackouts. At a minimum, the federal government must revoke Reliant’s market-based rate authority, ensuring the corrupt company can never hurt our economy and our citizens again. Instead, FERC has issued a fine that is pennies on the dollar of what Reliant and its executives stole from consumers.
The weak enforcement action by FERC is yet another example of the commission’s refusal to restore order in our nation’ s dysfunctional electricity marketplace. A growing list of consumer advocates and public officials agree that repealing market-based rates for those companies that have abused their responsibility is the only way to protect our citizens. FERC’s latest inaction is but one in a long list of anti-consumer actions, whether it is banning consumer representatives and officials accountable to the public from the boards of power market oversight boards; responding to the California energy crisis by attempting to accelerate deregulation nationally; or proposing to kick states out of the job of protecting consumers by ramming through the Commission’s Standard Market Design.
Prior to deregulation, companies charged prices directly tied to the cost of producing power. But over the past decade, FERC has pushed the idea of allowing the marketplace, not costs, dictate prices. The result has been increased volatility, decreased accountability, and higher profits by energy companies now free to charge whatever price they choose during peak hours of demand.
Executives for Houston-based Reliant, which recently changed its name to Centerpoint to hide its shame, are quoted for 36 pages discussing the company’s tactics of intentionally shutting down its power plants, forcing blackouts across California and driving prices through the stratosphere. For example, when one Reliant executive boasted that the company “pulled about 2,000 megs off the market,” another executive replied, “That’s sweet.”
Corporate criminals like Reliant must be held accountable for the millions of West Coast consumers who suffered from this wicked scam.
Click here to view the full transcript.