Exclusive: Congressman wants Attorney General to explain $12 million settlement for $100 million energy fraud
A proposed anti-trust settlement between the U.S. Justice Department and a subsidiary of energy giant National Grid is under fire for allegedly being too lenient to the power company — and critics say it’s just another sign of a dysfunctional regulatory climate.
National Grid subsidiary Keyspan Energy has been accused of using Enron-style tactics to manipulate the New York State energy market between 2006 and 2008, a scheme which withdrew power capacity from the market, raising prices and increasing profits for the power distributor.
But now Congressman Dennis Kucinich has joined consumer groups and regulatory agencies to urge the Justice Department to reconsider the settlement that requires the company to pay $12 million penalty to the government while not refunding a single dime of the $100 million the market manipulation cost consumers.
Ã¢â‚¬Å“I want an explanation from the Attorney General as to why this settlement was made,Ã¢â‚¬Â said Kucinich in an exclusive interview with Raw Story.
Ã¢â‚¬Å“I want to know why this company is getting a figurative slap on the wrist,Ã¢â‚¬Â he said. Ã¢â‚¬Å“And why theyÃ¢â‚¬â„¢re getting away with keeping three quarters what they might have earned from this.Ã¢â‚¬Â
Ã¢â‚¬Å“I hope this is not a sign of a regulatory roll-back,Ã¢â‚¬Â he said.
The congressmanÃ¢â‚¬â„¢s remarks came after Raw Story questioned Kucinich, the chair of the House Subcommittee on Domestic Policy Subcommittee of Government Oversight that oversees the Justice Department about criticism of the settlement resulting from an investigation into anti-competitive practices of Keyspan.
Keyspan reached the settlement with the anti-trust division of the Justice Department in February after an investigation revealed the company used a credit default swap engineered by investment bank Morgan Stanley to take control of competitor Astoria PowerÃ¢â‚¬â„¢s capacity and effectively corner the New York market. The swap earned Keyspan $68 million in profits, regulators determined, while allowing it to withdraw energy capacity from the market and inflate energy prices.
But a slew of protests filed with the federal court overseeing the settlement by advocates for consumers and even energy companies blasted the deal as too lenient to be an effective deterrent and doing little to compensate consumers for their losses.
Ã¢â‚¬Å“We estimate it cost consumers in excess of $100 million,Ã¢â‚¬Â said Chris Olert, a spokesman for Con Edison which filed a brief opposing the settlement.
Ã¢â‚¬Å“Our biggest concern is the rate payers will not receive refunds at all,Ã¢â‚¬Â he said.
The lack of benefit to the consumers who bore the brunt of higher energy costs also prompted the American Association of Retired Persons to file a brief opposing the settlement.
Ã¢â‚¬Å“The public interest may be harmed by this settlement if, instead of the intended deterrent effect, it sends a message that anti-trust violators who inflate prices by the exercise of market powerÃ¢â‚¬Â¦can escape serious consequences,Ã¢â‚¬Â the AARP said.
In its response the Justice Department argued that calculating consumer losses with any precision was too unreliable, and that the settlement forced the company to disgorge most of its illicit gains.
The Justice Department did not include an estimate of consumer losses in the economic impact statement included in the settlement.
Still, opponents of the settlement face an uphill battle taking on KeyspanÃ¢â‚¬â„¢s parent company, National Grid.
Since 2007 National Grid has spent roughly $6.4 million on energy industry lobbyists according to campaign finance watchdog OpenSecrets.org.
The firm also donated generously to the campaign coffers of Democrats and Republicans alike. Among the beneficiaries of the companyÃ¢â‚¬â„¢s largess were House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, who received $1000 each in the 2010 election cycle.
Recently the company forked over $2,500 to Rep. Joe Barton (R-TX), whose apology to BP CEO Tony Hayward during a House hearing on the gulf oil spill caused a national uproar.
The company has also been generous to the Sen. Charles Schumer (D-NY), contributing $4,000 in 2010.
Congressman Kucinich said he is concerned that the settlement is another sign that the promised regulatory reform from the Obama Administration has been derailed.
Ã¢â‚¬Å“There is no equity to this settlement,Ã¢â‚¬Â Kucinich said.