Former presidential candidate H. Ross
Perot denied Thursday that his consulting
company showed power suppliers how to
manipulate California's energy market to drive
up wholesale prices.
"These allegations are unfounded," Perot told
a panel of state lawmakers.
A California Senate committee is
investigating the state's energy crisis and any
role played by Perot Systems as well as
power suppliers.
State Sen. Joe Dunn said Perot Systems
outlined "flaws in the system to market
participants" after providing computer help to
the California Independent System Operator,
the power grid manager, and the now-defunct
Power Exchange as the state launched its
deregulated energy market several years ago.
Mike Florio, a member of the board that runs
the state's power grid, says California was
betrayed.
"We thought these were our people," Florio
told CBS News Correspondent Vince
Gonzales. "They were gleeful to take
advantage of what they had learned, and that
is very troubling to me."
Last year, a shortage of electricity led to the
near-collapse of California's three largest
investor-owned utilities and a round of rolling
blackouts. State officials have blamed many
of the problems on market manipulation by
out-of-state electric generating or trading
companies, including the now-bankrupt Enron
Corp.
Perot said his company had no conflict of
interest in its "unsuccessful attempt" to
capitalize on its knowledge of California markets. He said the information
presented to energy companies was publicly available.
"The market rules were public knowledge. Everybody could have access to the
market rules," Perot testified.
According to company e-mails, Perot employees decided to peddle their
knowledge, saying, "It should be fun and profitable.? Behind the state's back, they
made presentations and sent letters to major energy companies. Enron was told,
"Many holes in the system exist that could be used to deliver 'unexpected'
profits."
Companies were shown several different ways to push up prices. For example,
companies were told they could "have a 'sudden' outage of a big plant," so other
plants could "make more money."
That's exactly what whistleblowers claim happened.
Enron got caught using a scheme to clog transmission lines that Perot Systems
had pitched. Enron admitted no wrongdoing but paid $25,000.
Dunn told CBS News energy companies used almost every trick in Perot's power
playbook.
"We thought Enron was the brainchild of many of those strategies, but what it
turns out to be is Enron was simply Perot Systems' best student," Dunn said.
Dunn compared Perot Systems to a crooked home security company.
"They went out and marketed the flaws in that security system to the burglars
that were out there that ultimately committed the California heist."
The Texas billionaire and his company came to the attention of the committee last
month after a Perot Systems presentation surfaced among documents subpoenaed
from Reliant Energy, a Houston power supplier. The sales pitch to Reliant traders
detailed "holes" in the California energy market that "allowed strategies that
would destabilize the market."
Earlier this week, Dunn said the presentation amounted to a blueprint for
manipulating the energy market and said several strategies mirrored ones detailed
in recently released memos of Enron.
Perot said he had no personal knowledge of the presentation material, which he
said was never reviewed by his office. Perot Systems earlier retained three
economists who concluded that the company didn't divulge confidential
information or violate conflict of interest clauses in its contract with the state
power entities.
Of particular interest to Dunn is a 1997 presentation by Perot Systems to the
Tokyo Electric Power Co. The report detailed how California market rules were
similar to markets in the United Kingdom and some South American energy
systems, and how to find the loopholes that would let traders drive up energy
costs.
The Tokyo document "suggests that California wasn't the first deregulated market
to be exploited," Dunn said.
The report includes various strategies used in the British market "that can be used
on an ongoing basis until the market or its regulators act upon such strategies."
Techniques for energy companies that were outlined in the report included having
a sudden "outage" at one plant that could "raise the spot market such that
remaining plants maximize revenues."
