Another Week, Another Class Action Lawsuit in California's Energy Sector

In another case inspired by the added information flowing from ongoing federal and state investigations, Reliant Energy and others were targeted last week in a Los Angeles law firm's class action lawsuit , alleging a "massive conspiracy" to manipulate wholesale natural gas prices through bankrupt Enron Corp.'s now-defunct online energy trading operation.

Reliant had no immediate comment in the wake of the filing last Wednesday.

An individual Reliant gas trader based in Long Beach, CA, Kathleen Zanaboni, who is part of the lawsuit as an extension of extensive information generated by the ongoing Federal Energy Regulatory Commission probe and released to the public, was the focus of a major business news report in the Los Angeles Times Sunday. The article noted that the FERC-generated data indicated that Zanaboni within existing law and regulations produced millions, if not billions, of dollars of excess natural gas revenues through the process of "churning" in the winter of 2000-2001 when wholesale California-Arizona border prices skyrocketed.

Although Zanaboni was not specifically identified in the FERC March 26 report, the LA Times' report said that her buying and selling furiously at many times the needs of Reliant's companies "significantly increased" the price of natural gas in California. The news report specifically attributes to "regulators" the fact that Zanaboni broke no laws.

Nevertheless, the trader was named, along with Reliant, Reliant Resources, Inc., and Centerpoint in the class action suit by the LA law firm of Engstrom, Lipscomb and Lack filed in a state Superior Court in LA. A call to the law firm by Power Market Today was not returned by the end of the business day Monday.

"Reliant's churning had the effect of driving up the price of gas to record levels in all of the California markets resulting in well over one billion dollars in excess charges of California consumers during the 2000-2001 time period," the lawsuit alleges as reported locally. At the time, the legal action noted that Enron Online had only one location for Southern California gas prices -- Topock, AZ -- and that limitation made Enron's online trading floor "ripe for manipulation."

The lawsuit was filed on behalf of several California consumers and at least one corporation. It focused on Reliant and the related energy firms, but the LA Times report attempted to place a large amount of responsibility for the wholesale gas prices spikes on the one lone trade.

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