Cobb

From Overlawyered - June 2001:

Other California politicos have also stepped up the business-bashing to an intensity not heard since the 1970s, to judge from an account by Chris Weinkopf in the Los Angeles Daily News. At a press conference, state senate president pro tem John Burton "announced the solution is for Sacramento to 'terrorize the bastards' [electricity generators] by seizing their power plants. If he were governor, he said, he 'would have taken them yesterday.' The actual governor, Gray Davis, is more subtle in his attacks. He's only called the generators 'marauders,' 'pirates' and 'the biggest snakes on the planet Earth.' ... Lt. Gov. Cruz Bustamante has called for empowering the state to put energy executives in jail. ...Treasurer Phil Angelides has suggested that if generators 'don't take their foot off our throat,' the state should 'seize a plant or two to sober them up.'" (Chris Weinkopf, "California’s Assault on Energy Producers", Los Angeles Daily News, April 24, reprinted at FrontPage magazine).

Bustamante tells KTVU of his participation in class action:

MORRENO: CRUZ BUSTAMANTE, BY NOW YOUR SLOGAN IS CLEAR, NO ON THE RECALL, YES ON CRUZ BUSTAMANTE BUT YOU HAVE DIFFERENT IDEAS THAT GOVERNOR GRAY DAVIS. NAME SPECIFIC ITEMS THAT YOU WOULD HAVE HANDLED DIFFERENTLY AS GOVERNOR OF CALIFORNIA THAN GRAY DAVIS DID.

BUSTAMANTE: THERE WAS A MOMENT IN THE ENERGY CRISIS, I BELIEVE, THAT WAS A PIVOTAL MOMENT. THE ENERGY COMPANIES WERE ACTING LIKE TERRORISTS. THEY WERE HOLDING US UP. AND THEY WERE BLACKMAILING US. AND THEY BASICALLY SAID THAT IF YOU DO NOT PAY US THIS MONEY, IF YOU DO NOT INCREASE OUR CONTRACTS, THEN WE'RE GOING TO TURN OFF THE LIGHTS. I THINK I WOULD HAVE CALLED THEIR BLUFF.

MORRENO: BUT YOU ARE THE LIEUTENANT GOVERNOR. WHY DIDN'T YOU SPEAK UP?

BUSTAMANTE: I DID. IN FACT, I SUED THE ENERGY COMPANIES. I WAS THE FIRST PERSON IN THE STATE OF CALIFORNIA ON A CLASS ACTION LAWSUIT. I SUED THE ENERGY COMPANIES. FIVE OF THEM, AS A MATTER OF FACT. AND AS A RESULT OF THE LAWSUIT, I'M PART OF A GROUP WHO GOT 1.8 BILLION DOLLARS BACK TO THE STATE OF CALIFORNIA. AND WE'RE EXPECTING MORE SETTLEMENTS IN THE VERY NEW FUTURE.

Bustamante was unsatisfied with offers from Duke Energy - May 2001:

Duke Energy released details of its offer to Gov. Gray Davis to cut its energy charges retroactively and into the future in exchange for "prompt suspension of State investigations, lowering of rhetoric and stay of State litigation."

Its proposal listed an alphabet soup of investigations by Attorney General Bill Lockyer, the Public Utilities Commission, Energy Oversight Board, state auditor, Independent System Operator, Federal Energy Regulatory Commission, private class-action and antitrust lawsuits, and claims by investor-owned utilities.

The disclosure came two days after Williams Cos. agreed to refund $8 million to settle a federal investigation into alleged improper charges for electricity.

It came the same day Lt. Gov. Cruz Bustamante filed suit against five generators. Bustamante is sponsoring legislation that would allow corporate officers to be jailed and part of a company's assets seized if the company was convicted of price gouging.

Here is the Executive Summary:

Five multinational corporations overcharged the State of California billions of dollars for power, after the Governor declared the electricity emergency in January, in violation of state antitrust and unlawful business practices laws. The defendants control the critical 19 gas-fired electric generation plants, located in 11 California counties, that provide critical amounts of electricity to the state’s consumers. The plants were owned for decades by California’s utility companies and were operated under the direction of the California Public Utilities Commission (PUC). Under deregulation, the power to turn the plants’ generators is held by executives in the five defendant corporations. These companies used their power over the generators to extract billions of dollars of unlawful overcharges from California consumers. The defendants’ excessive charges were a substantial cause of California’s electricity crisis, in which power prices have risen from $7 billion in 1999 to a projected $70 billion in 2001.

After California declared a State of Emergency, these generators raised the prices even higher. The complaint alleges such conduct violates other state laws that prohibit unscrupulous price gougers from excessive profiteering during state emergencies. The complaint is based upon published reports that the defendants used their market power in 98% of the bids they submitted to California’s electricity spot market. In other words, these five companies acted like monopolists 98% of the time they sold power to this California power market.

Also named as defendants are the five companies’ 14 key executives. These individuals are making millions of dollars from stock options, salaries, and the increased stock values. The individual defendants also include the heads of the five companies’ trading floors. It is through these massive unregulated electricity trading operations that billions of excess costs are added into the paper trades of California power generation transactions.

The plaintiffs are proceeding under well established California law that allows taxpayers to bring actions to stop the waste of taxpayer funds. They are also proceeding under California’s unfair, unlawful, and fraudulent business acts and practices law that allows consumers to sue violators on behalf of the general public. The plaintiffs are also suing under California antitrust laws.

The complaint details the history of deregulation and the false message the defendants delivered to consumers - (that they were helping to create a competitive California electricity market that would enjoy lower prices). At the same time, these same five companies were telling their investment bankers that the companies stood to make billions of dollars from California by imposing higher prices on consumers. The complaint also details how power plants were sold on the basis of their market power attributes, their strategic locations throughout the state in areas where there were known shortages, and provisions that would allow the new owners to raise prices without losing customers because of the high inelasticity of demand for electricity.

The suit seeks to recover billions of dollars of overcharges, and injunctions that would stop the five companies from any further violations of the state’s consumer and emergency gouging laws. The case was filed in Los Angeles County Superior Court on Wednesday 2 May 2001.

Here is the press release from Bustamante's office. A PDF of the filed complaint is available there too.