The San Diego attorney spearheading a high-profile class action lawsuit aimed at Dynegy and four other merchant generators selling in California’s wholesale power market Tuesday told the San Diego Union-Tribune in a news report that the state’s energy consumers would be better served by Enron Corp. going into bankruptcy rather than being rescued in a merger.

A bankruptcy proceeding is more likely to shed light on alleged manipulation of western electricity markets by Dynegy, Enron and others, according to Michael Aguirre, the San Diego attorney representing the state’s Lt. Gov. Cruz Bustamante. The Bustamante lawsuit alleges energy price manipulation by Dynegy and others at California-based power plants they own. Aguirre predicts other large energy firms may fall in the wake of Enron, now that the alleged manipulation has collapsed.

“The collapse is threatening to create a domino effect on other companies,” Aguirre said in the Union-Tribune article. “A merger is likely to take down Dynegy as well as Enron. It’s better to squeeze out the losses (through bankruptcy).”

In the meantime, the California attorney general’s office reiterated that it was reviewing the proposed Dynegy-Enron merger, although a spokesperson indicated it was still too early to determine what position the state would take in the proposed marriage of the two companies that are among the six to eight major energy suppliers broadly criticized by state officials for alleged “price-gouging” and manipulation of the state’s wholesale market to drive up power prices.

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