The Justice Department yesterday accused a Houston-based energy company of driving up electricity prices during the California energy crisis, the first company to face criminal charges for creating the appearance of an electricity shortage three years ago.
A six-count indictment returned by a federal grand jury in San Francisco charges Reliant Energy Services of conspiracy and wire fraud. It says the company briefly shut down the majority of its power generation in California to fake an electricity shortage and reap millions of dollars in illegal profits as a result of increased prices.
“When a company conducts itself in the manner Reliant Energy Services is alleged to have acted here, it will face severe consequences,” said Attorney General John Ashcroft, announcing the charges yesterday in Washington.
Reliant representatives said its company “violated no laws” and “plans a vigorous defense.”
“We believe the actions that are the subject of the indictment were not in violation of the laws, tariffs or regulations in effect at the time,” said Reliant Resources general counsel Mike Jines.
Reliant Energy Services is a subsidiary of Reliant Resources Inc., one of the nation’s leading power producers, which provides electricity in 13 U.S. states. In January 2003, the parent company entered into a $13.8 million settlement with the Federal Energy Regulatory Commission regarding charges similar to those outlined in yesterday’s indictment.
Pat Hammond, a spokeswoman for the company, said Reliant has “fully cooperated” with authorities through various investigations and stressed that the company independently discovered the actions in question and voluntarily reported them.
Californians experienced a series of rolling blackouts and skyrocketing energy prices during 2000 and 2001.
Yesterday’s indictment included conspiracy, wire fraud and commodities manipulation charges against Reliant Energy Services and four of the company’s employees: Jackie Thomas, 49, a former vice president of Reliant’s power trading division; Reggie Howard, 37, a former director of the west power trading division; Lisa Flowers, 37, a term trader; and Kevin Frankeny, 42, manager of western operations.
Mrs. Hammond said Mrs. Thomas and Mrs. Flowers no longer work for the company, and the other two employees were placed on administrative leave last year. The Justice Department said arrest warrants for the four, all of whom live in Texas, were stayed until noon today to give an opportunity for self-surrender.
If convicted, Reliant Energy Services faces up to millions of dollars in fines and probation. The employees also face significant fines and jail time if convicted.
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