OKLAHOMA CITY (AP) _ An Oklahoma-based company accused of manipulating California's electricity market to reap outlandish profits doesn't actually own the power plants that have thrown the company into controversy.
Williams Co. Inc., based in Tulsa, entered the California energy market three years ago. Last year, Williams earned more than $1 billion from its energy trading operations _ an 870 percent increase over the previous year's figures.
The company's phenomenal growth is reflected in the compensation of its chief executive, Keith Bailey, whose 2000 salary packaged of $7.05 million was 346 percent higher than the previous year.
The power plants that produced Williams' profits are owned by Virginia-based AES Corp., which bought them from a California utility when the state deregulated the electricity industry in the late 1990s.
Under a 20-year agreement, Williams essentially pays AES to convert natural gas into electricity, which Williams then markets. AES has lost money on the arrangement.
Meanwhile, Williams stated in its most recent earnings report that revenue from energy marketing and trading soared by 322 percent during the first quarter of 2001, resulting in an additional $503 million in sales.
The company attributed the increase to higher profit margins from gas and electricity services, which have benefitted from ``increased price volatility'' in the marketplace.
A lawsuit filed in California in May accused Williams of exercising power over electricity prices, which is unlawful in the state, said Michael Aguirre, the attorney who filed the suit.
``According to an analysis of bids,'' Aguirre said, ``Williams exercised that power 90 percent of the time.''
The lawsuit also alleges that Williams coordinated its pricing activities with other gas-fired generator owners, in violation of antitrust laws.
In June, AES confirmed in a filing with the Securities and Exchange Commission that both it and Williams are being targeted with an antitrust probe by the U.S. Justice Department.
Bailey dismissed the validity of the claims against his company.
``These are obviously easy allegations to make _ and they serve a political purpose,'' Bailey said. ``But the reality is that they're not true.''
Deregulation experts generally agree that companies like Williams are not to blame for California's power crisis.
Ken Malloy, president of the Center for the Advancement of Energy Markets, said Williams appears to be guilty of making ``very shrewd business judgments'' that are within the confines of the law.
``Yes, California created a market that allowed people to take advantage of it _ and that's not a good thing,'' Malloy said.
``But obviously, blaming the people who took advantage of a market opportunity is the wrong thing to do,'' he said. ``You should fix your market and then allow a more effective market to operate.''