Attorney General Lockyer Announces Settlement with Williams That Saves Ratepayers $180 Million and Provides New, Clean and Reliable Power to San Francisco and San Diego

(SACRAMENTO) – Attorney General Bill Lockyer today announced a $417 million settlement of enforcement actions against Williams Energy Marketing & Trading that will save electricity consumers $180 million, provide more reliable and cleaner power in San Francisco and San Diego, and increase schools' use of alternative energy.

"This settlement benefits the consumers who have borne the brunt of this state's energy crisis, helps protect our environment and improves the reliability of our electricity grid," said Lockyer.

The settlement is the largest resulting from the Attorney General's two-year investigation into the state's power crisis and energy traders' illegal market conduct. The wide-ranging effort includes several ongoing investigations, and more than 50 cases before federal regulators and the courts which seek redress for the state and consumers.

The Williams settlement resolves two lawsuits filed by the Attorney General against Williams that alleged the company illegally priced its energy and unjustly profited by double-selling its electricity. It also resolves lawsuits filed by local governments and private plaintiffs, including Lt. Gov. Cruz Bustamante and Assemblywoman Barbara Matthews (D-Tracy). Williams remains liable for willful fraud and criminal conduct, and must cooperate with the Attorney General's ongoing investigation.

The Attorney General's settlement calls for Williams to reduce by $180 million the price of its long-term contract with the state to provide electricity, generating capacity and natural gas. The reduction translates into a $180 million savings for ratepayers, who are footing the bill for the state's long-term contracts with Williams and other energy suppliers.

Another key part of the settlement requires Williams to furnish $90 million worth of generating assets to the communities of San Francisco and San Diego. The assets will consist of six LM6000 turbines, which will provide the communities cleaner power. The facilities also will help alleviate bottlenecks in both areas' power grids, and thus increase the reliability of the electricity supply during times of peak demand.

"The residents of San Francisco and San Diego experienced unprecedented blackouts and rate increases as a result of California's energy crisis," Lockyer noted. "By providing new, cleaner sources of electricity, we'll help them avoid that hardship in the future and protect our air quality at the same time."

Under the settlement, Williams also will pay $147 million in cash through 2010. Of that total, roughly $80 million will fund alternative energy and energy efficiency retrofitting of schools and other public buildings in California. Similar alternative energy provisions were included in settlements reached earlier this year with Constellation and Calpine.

"This settlement provides a means to make our schools, hospitals and other public buildings more energy efficient through alternative technologies such as solar power," said Lockyer.

The settlement also requires Williams to reimburse the Attorney General's Office, California Public Utilities Commission and Electricity Oversight Board for their investigation costs. Of the total reimbursement, $4.5 million will go to the Attorney General's Office to help fund its ongoing investigation.

The settlement is part of a broader agreement under which Williams renegotiated its long-term energy contract with the state. Including the $180 million from the Attorney General's settlement, the renegotiated contract will cut the price by about $1.4 billion, from $4.3 billion to roughly $2.9 billion.

The Attorney General's settlement resolves two separate complaints filed in state court. One alleged Williams violated the state's Unfair Competition Act by illegally pricing its energy. The second alleged Williams double-sold power in violation of rules designed to ensure the reliability of the electricity grid, and unjustly profited by charging the state millions of dollars for emergency generating capacity that the company never provided as promised.

The Attorney General's Office reached the settlement in conjunction with the Attorneys General of Washington and Oregon, the cities of San Francisco and Oakland, the counties of Santa Clara and Contra Costa, nine water districts in the San Diego area, and class action plaintiffs.