SACRAMENTO – A state Senate committee wants to know why Morgan Stanley, a multibillion dollar financial firm and adviser to several power generators, destroyed documents that potentially could show efforts to gouge California consumers.
The company recently also has come under the scrutiny of an Oregon lawmaker who is concerned the company’s purchase of the rights to move power between California and Oregon could result in artificially high prices.
For several weeks, Morgan Stanley had told the committee it would provide the documents, but said last week they had been destroyed as a matter of routine “years ago,” said Sen. Joe Dunn, D-Santa Ana, the committee’s chairman.
Members of the committee are trying to determine whether power companies worked together to raise prices by purposefully holding back electricity to drive up demand.
Morgan Stanley’s involvement would have been several years ago, when it advised out-of-state energy companies to buy California power plants up for sale.
A Morgan Stanley attorney told the Orange County Register that the company did not destroy any documents after Dunn’s committee requested the documents May 16.
“At the end of the project, they decided what they were going to keep and what they weren’t going to keep, and those decisions were made years before the energy crisis and years before the committee existed,” said Paul Patono, a company attorney.
Dunn noted it is not illegal to raise prices as long as a company doesn’t collude to force prices upward.
Private utilities became able to sell their plants as part of the 1996 plan to deregulate the electricity market. Although the plants were expected to sell below their book value, they instead sold for up to three times that price, although the state then had an oversupply of electricity and old plants.
While the public was told deregulation would lead to lower electricity prices, energy officials and experts testifying before the committee have said it’s unlikely investors would buy aging power plants if they believed that to be true.
Dunn is curious if there was any kind of plan or advertising that said the plants, if bought a certain way, would give of the buyers market power in the wholesale electricity market.
The committee is still moving forward with contempt proceedings against Houston-based power marketers Enron Corp. and Reliant Energy for refusing to hand over documents to committee investigators.
New York-based Morgan Stanley, now Morgan Stanley Dean Witter & Co., got into the energy trading in 1984 and now is one of the top 20 U.S. power marketers.
The company also has come under the scope of Rep. Peter DeFazio, D-Ore. Morgan Stanley bought the rights to transmit just under a third of the power flowing between California and Oregon from the Bonneville Power Administration through February 2002.
DeFazio has written a letter to the BPA, asking that the agency make sure the Northwest keeps its “reliable, affordable” energy source.
“The ability of a financial services company, which has no obligation to serve electricity consumers, to lock up all available capacity for a year raises serious concerns,” DeFazio wrote.
A company spokeswoman said Morgan Stanley acquired the transmission capacity from BPA to meet its power delivery obligations in the Northwest, and had no intention of manipulating the market.