A federal grand jury indicted Reliant Resources subsidiary Reliant Energy Services for manipulating the state?s market in 2000. The April 8 indictments, announced by Attorney General John Ashcroft, allege Reliant ?intentionally created the appearance of an electricity shortage? and disseminated ?false and misleading information to the market.? ?This indictment demonstrates that we can and will bring criminal charges against a corporation when its conduct, and its actions in response to an investigation, show that criminal prosecution is necessary to deter future misconduct and impose required reforms,? Ashcroft stated. ?We believe the actions that are the subject of the indictment were not in violation of laws, tariffs or regulations in effect at the time,? countered Reliant Resources general counsel Mike Jines. ?There is absolutely no basis to contend that this conduct contributed to the energy shortage that occurred in California later that year.? The company will ?vigorously contest? the matter, he added. The charges of conspiracy to commit wire fraud and commodities manipulation named the company, as well as four of its Texas-based officers and former executives individually. Reliant and the Federal Energy Regulatory Commission announced a settlement for $13.8 million for the same alleged manipulation in January 2003. The allegations are based on two days of trading?June 21 and 22, 2000. The payment reflects what FERC deemed the worst-case scenario of withholding, calculated as if Reliant had been a price taker. The scheme went something like this: Reliant had a long position for the third quarter 2001; that is, it bet on prices going up for some future buyer for its holdings. An unexpected drop in the forward prices used to value its position caused a paper loss. ?Reliant reduced the capacity it bid into the [market] for delivery June 21 by approximately 1,000 MW to see if [market] prices would increase and thus also raise forward prices,? according to FERC. Transcripts of the incident revealed by FERC note that Reliant traders didn?t actually withhold. They bid power into the market at such high prices, however, that it had the same effect as withholding supplies. ?During the week in question, electricity was plentiful in California, there was no supply shortage, no California Independent System Operator?declared emergency, and no blackouts, and prices were relatively low,? Jines argued. Although the possibility of an indictment was announced a month ago, the generator community did not believe it would come to fruition. ?The isolated incident of the trading conduct for two June days in 2000 does not indict the entire market, its participants, or the trading behavior of other companies,? said Gary Ackerman, director of the Western Power Trading Forum. ?The events in question did not take place during the rapid price run-ups of late 2000 and the first half of 2001. Therefore, these indictments stand alone, and the fate of the individuals involved will be determined, I believe, strictly on the merits of the case the federal government attempts to make.? Reliant, too, appeared to distance itself from its subsidiary. ?We don?t believe that this action will have any material impact on our ongoing business operations, including...contracts and agreements to which Reliant Energy Services is a party,? Jines said. Consumer groups were elated by Ashcroft?s indictment. ?This should only be the beginning of indictments,? said Doug Heller, Foundation for Taxpayer & Consumer Rights executive director. Heller called for generators and traders who profited during the energy crisis to ?refund all the stolen money.?