Attorney General John Ashcroft told a news conference the charges were the first against a corporation for engaging in fraudulent, manipulative trading practices during the crisis, when soaring electricity prices triggered rolling blackouts.
According to the indictment, the defendants devised an illegal scheme to drive up prices by shutting down four of the unit's five power generation plants in the state, creating the appearance of a shortage and falsely telling markets environmental limits and maintenance problems were to blame.
Reliant then turned some generating capacity back on to reap prices that went as high as the $750 megawatt hour federal price limit, according to the indictment handed up by a grand jury in San Francisco.
Reliant denied any wrongdoing.
"We believe the actions that are the subject of the indictment were not in violation of laws, tariffs or regulations in effect at the time," Reliant Resources General Counsel Mike Jines said in a statement.
RELIANT TO CONTEST CHARGES
"We intend to contest these charges vigorously," he said. "Any suggestion that Reliant did not fully cooperate with the Department of Justice investigation is inaccurate and unfair."
The indictment alleged that California electricity buyers overpaid by as much as $32 million as a result of the scheme. Among the victims was Pacific Gas & Electric in San Francisco, Justice Department officials said.
"By shutting off power plants to boost the cost of electricity, Reliant's conduct is alleged to have left millions of consumers vulnerable to the higher costs and potential blackouts at the beginning of one of the worst energy crises in history," said Kevin Ryan, U.S. attorney in San Francisco.
"Faced with evidence of widespread fraud within the company, Reliant chose to be uncooperative during the federal investigation," Ryan, who attended the news conference, said in a statement.
The indictment charged Reliant Energy Services, a subsidiary of the Houston-based company that was one of the "Big 5" electricity generators. It purchased five electric power plants in California after deregulation forced utilities to divest their plants in the late 1990s.
The others were Duke Energy Corp. The indictment also named four officers: Jackie Thomas, a former vice
president of Reliant's Power Trading Division; Reggie Howard, a former director
of the trading division; Lisa Flowers, a term trader for the trading division;
and Kevin Frankeny, Reliant's manager of western operations.
The six-count indictment charged the defendants with one count of conspiracy
to commit wire fraud and commodities manipulation; four counts of wire fraud;
and one count of commodities manipulation.
The four defendants are all Texas residents. Justice Department officials
said the four are expected to make their initial appearance in federal court in
San Francisco on Friday. (additional reporting by Deborah Charles, Tim Dobbyn
and Matt Daily)
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