As he had against five merchant generators last year, California’s lieutenant governor Cruz Bustamante Wednesday filed a criminal lawsuit in a Los Angeles state Superior Court on behalf of the state’s taxpayers against 38 energy trader/marketers and two McGraw-Hill industry publications that publish natural gas price indices relied on by state officials and the market to establish energy prices.

The lawsuit alleged the publications and market participants “engaged in a scheme to report and publish false and fraudulent natural gas prices with the intent to affect the market price of gas and electricity.” The lawsuit named both Gas Daily and Inside FERC. The filing is not now a “class action,” but Bustamante and his class-action lawyers are hoping it will gain that status from the court, according to a spokesperson in the lieutenant governor’s office in Sacramento.

The 38 energy trader/marketers named include many who have been traditionally relied on by the price reporters for price submissions to the indices, and some who were named by a whistle-blowing former Gas Daily employee in state legislative testimony two days before the suit was filed. The companies include many of the top energy marketers.

Bustamante, with the help of San Diego class-action attorney Michael Aguirre, took the legal action following testimony by Michele Markey, a former natural gas/electricity pricing director for Gas Daily, who told a special hearing of the state senate investigative committee looking at alleged energy market price manipulation in the 2000-2001 state energy crisis period that some of the same market sources relied on for prices used to establish gas indexes also were trading in the market on a daily basis, so they would try to inflate or deflate what they reported to help their mark-to-market positions (see Daily GPI, Nov. 20).

Markey, who was taken off the index pricing job in late August 2001 soon after McGraw Hill’s Platts publications bought FT Energy, which included Gas Daily, and left the company last March, further said the price reporters were not taking the time to look at price quotes closely or analyze information coming in. McGraw-Hill, through a New York-based spokeperson, vigorously denied this Friday and accused Markey of badly misstating how the pricing index is compiled.

Regarding the California official’s lawsuit, Brian Jones, the publisher’s spokesperson, said the company views it as “baseless — without legal or factual merit.” He said McGraw-Hill intends to “aggressively defend” itself, expecting to prevail in the courts. The lawsuit alleges violations of criminal state laws against “willfully publishing false statements or employing fraudulent means with the intent to affect the market price of natural gas and electricity.”

Bustamante filed a more traditional civil class action suit on behalf of some specific consumers against five merchant generators in May 2001, alleging they “systematically engaged in price-fixing” to manipulate the state’s wholesale electricity market. To date, nothing has happened with that suit, although the lieutenant governor’s office said it is still pending.

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