The University of California filed a lawsuit last week against
several major energy providers, accusing the companies of
manipulating gas prices during California’s energy crisis of
2000-2001.
The suit, filed Nov. 1, claims that the companies ““
producers, marketers, traders, transporters, distributors and
sellers of retail natural gas ““ engaged in “unfair and
deceptive conduct” that caused state gas retail prices to
mount to “about six times the national average.”
“The university was charged artificially,” said Trey
Davis, a spokesman for the UC Office of the President.
The suit was filed on behalf of the UC by the law firm of
Cotchett, Pitre, Simon and McCarthy.
“These companies created a conspiracy,” said Nanci
Nishimura, an attorney with the law firm. She acknowledged the
difficulty inherent in litigation, especially against such powerful
and influential companies. “Nonetheless,” she said,
“somebody’s got to take a stand,”
One of the companies targeted by the suit was indicted by the
U.S. Justice Department in April. Houston-based Reliant Energy and
four of its officers were charged with “conspiracy,
commodities manipulation and wire fraud.”
“The vast majority of American companies are businesses of
integrity,” said Attorney General John Ashcroft in a
statement in response to the indictment issued by the Justice
Department about the indictments. “But when a company
conducts itself in the manner Reliant Energy Services is alleged to
have acted here, it will face severe consequences.”
Another company included in the UC’s suit is WD Energy,
formerly known as Encana Energy Services, Inc., which has paid $20
million to settle a lawsuit filed by the U.S. Commodity Futures
Trading Commission. That lawsuit also made claims of attempted
manipulation and false reporting, according to a statement issued
by the commission in 2003.
The energy providers could not be reached for comment.
As far as expectations for the suit’s outcome, Davis said
“it would be premature to speculate.” But he said the
UC wouldn’t have filed the suit if it didn’t feel it
had a strong case.
“We’re confident in the case,” Nishimura
agreed.
Were the university to be successful in its lawsuit, Davis said
it would “allow (the UC) to continue to provide quality
service to (its) buildings”; the UC has about 2,500 buildings
across the state.
Cotchett, Pitre, Simon and McCarthy are also investigating the
companies for engaging in “wash trades” and
“churning.” Wash trading is an illegal stock trading
practice where an investor simultaneously buys and sells shares in
a company through two different brokers; “churning” is
the rapid buying and selling of natural gas. These practices,
according to the law firm’s Web site, created the illusion of
high demand, which in turn increased prices.
Nishimura highlighted the effect of these companies’
conduct on the UCLA campus. UCLA is a significant user of natural
gas and was greatly affected by the energy crisis, she said.
“When it comes down to it, it’s for the
students,” she said.