DOJ: News Release

McGrath Sues Over Energy Costs

HELENA — Attorney General Mike McGrath on Monday filed suit against several major energy companies doing business in the western U.S. The suit alleges that energy consumers in Montana were defrauded out of millions paid in excessive rates during, and since, the “energy crisis” of 2000 and 2001.

According to the suit, the defendants unlawfully manipulated the markets for electricity and natural gas by fixing prices and restricting supply in California. That in turn affected prices paid in Montana by both residential and industrial power users.

“Thanks to the flagrant market manipulation in 2000 and 2001, Montana consumers paid rates that were anything but reasonable and just,” McGrath said. “In this state, businesses closed, jobs were lost and consumers were bilked out of millions. We’ve paid an unacceptably high price for the energy companies’ deception, not just through skyrocketing power bills but in lost jobs and business opportunities. These lawsuits aim to set that straight.”

McGrath and co-plaintiff Flathead Electric, a locally owned Montana rural electric cooperative in northwest Montana, filed simultaneous actions in state district court in Helena and before the Montana Public Service Commission. The Attorney General indicated that other plaintiffs may join the legal action at a later date.

The petition (PDF 36KB) filed with the PSC notes that the Commission is legally responsible for ensuring that public utilities charge rates that are “reasonable and just” and for protecting consumers from fraudulent and deceptive conduct by electricity and natural gas marketers.

The suits refer to a major investigation conducted by the Federal Energy Regulatory Commission in early 2002. FERC’s report, released in March this year, determined that there was manipulation in both the western electricity and natural gas markets. It also concluded that the electric and gas markets in the west are inextricably linked.

McGrath noted that, because of this illegal market manipulation, prices for natural gas and electricity approximately doubled in Montana.

“Industrial customers of NorthWestern Energy paid a terrible price for the misconduct of the companies that engaged in market manipulation,” the suit contends. “The industrial class as a whole paid roughly three to four times as much for power during 2000-2001 as they had the prior year…”

McGrath said that natural gas customers are also affected.

“NWE recently proposed that natural gas prices for Montana residential customers go up to approximately $4 per million cubic feet,” he said. “That’s roughly two-and-a half times what we were paying in 2000-2001 under the PSC-approved rate of roughly $1.50 per million cubic feet.”

The actions seek:

  • refunds of the unjust and unreasonable charges to consumers,
  • cancellation of the licenses of the companies involved in the illegal market manipulation who are licensed by the PSC to market electricity and/or natural gas in Montana to retail customers, and
  • penalties of up to $1,000 for each day that any fraudulent or deceptive practice was engaged in by any company licensed to market to retail customers in Montana.

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