"Enron has been working directly with California leaders to try and resolve the energy crisis -- but its first order of business has been to secure payment of money that's now owed it by SoCal Edison and PG&E The utilities are $12 billion in debt." Energy wholesalers profiteering or just profiting? By C. Bryson Hull HOUSTON, Jan 25 (Reuters) - Massive profits made by power producers during California's electricity crisis are demonstrating that one man's hallelujah is another's expletive deleted. On one side stand power marketers and sellers with stellar fourth-quarter earnings reports who say they have profited legally, blaming California's bungled deregulation plan, lack of electricity generation and poor weather for the problems. Opposite them are corporate watchdogs, lawyers and California politicians who see in the swollen balance sheets of the mostly out-of-state companies acts of profiteering, price-fixing and greed. Critics argue that corporate greed is the reason Californians have suffered rolling blackouts and the state's two largest utilities, Edison International's <EIX.N> Southern California Edison and PG&E Corp.'s <PCG.N> Pacific Gas & Electric, are hovering at the edge of bankruptcy. Public Citizen, a Washington. D.C.-based consumer advocacy group, on Wednesday accused several power wholesalers and marketers of gouging Californians, echoing Gov. Gray Davis' charge earlier this month that the state was being held hostage by "out-of-state profiteers." "Profiteering is just a loaded term. To some people it means illegal action to make money, and some people say anything that's unfair is profiteering," said Adrian Moore, executive director of Reason Public Policy Institute, a nonpartisan, pro-free market think tank in Los Angeles. "The companies are just taking advantage of the rules that our foolish legislators created." The companies include several which reported exceptional earnings for the past quarter, among them Duke Energy Corp. <DUK.N>, Enron Corp. <ENE.N> and Dynegy Inc. <DYN.N>. Reliant Energy Inc. reported a sevenfold increase in income because of its activity in Western markets in the third quarter. While even their critics acknowledge that record high prices for natural gas and accordingly, gas-fired generation, helped the balance sheets, the companies easily profited under California's deregulation scheme. The rules forced utilities to buy their power for the day ahead from the state-created California Power Exchange (CalPX) at one price, set by taking the highest successful bid submitted by wholesalers. At first, generators kept their bids low to ensure their plants were utilized and because they were likely to get a higher price anyway. But not for long. "As soon as demand equaled supply, these guys had carte blanche to charge whatever they wanted the power suppliers got to throw prices out at whatever level they wanted to and rake in the dough, and by gosh, they did," Moore said. The state's other pooled electricity market, the Independent System Operator, had to bear even higher prices when tight electricity supplies, caused by a shortage of generation capacity, forced them to buy power to prevent blackouts. The unexpected power shortage last August has led some critics to accuse generators of withholding supply to spike prices, although a Federal Energy Regulatory Commission investigation found no substantive proof. The California Attorney General's office and several other agencies are still investigating. The San Francisco City Attorney's office last week sued 13 companies for $1 billion, alleging they conspired to withhold power. Deputy City Attorney Nathan Ballard told Reuters their proof may include phone records, e-mail and other correspondence, and evidence of "irrationally high prices at times of low demand." "My 12-year-old cousin knows the laws of economics don't work that way," Ballard said. All of the companies have denied the allegations, and deny they did anything other than what capitalists should do -- make money. "It's always easy to try to lay blame at someone else's doorstep, but that only delays resolution to the problems," Reliant Energy spokesman Richard Wheatley said. "It's pretty hard to be blamed for causing this problem in California when they brought it upon themselves." Reliant, Dynegy and Enron have all been working directly with California leaders to try and resolve the problems, but their first order of business has been to secure payment of the money that SoCal Edison and PG&E owe them. The utilities are some $12 billion in debt. Exactly how much they are owed is unclear, but Dynegy and Mirant Corp, the power plant unit of Southern Co. <SO.N> took an unspecified reserve to protect against nonpayment. Duke set back $110 million to protect against about $400 million of receivables. Reliant's receivables are in the hundreds of millions, Wheatley said.
