## Facts

- The United States charged Reliant Energy Services, Inc. and four employees with commodities price manipulation under Commodity Exchange Act (CEA) § 9(a)(2), wire fraud, and conspiracy.
- The charges arose from alleged conduct during the California electricity crisis in summer 2000 involving the California Independent System Operator and the California Power Exchange spot-market auctions.
- Reliant owned multiple electricity-generation plants in Southern California and allegedly faced losses from previously executed long-term electricity delivery contracts after prices fell in June 2000.
- The government alleged defendants conspired to raise spot-market prices by physically withholding electricity through intentional plant shutdowns, submitting inflated bids into auction mechanisms, and spreading false rumors about near-term supply difficulties.
- The alleged conduct was intended to create an artificial shortage, increase market-clearing prices, and allow Reliant to avoid losses and obtain substantial profits.
- Defendants moved to dismiss the indictment on constitutional and statutory grounds; after superseding indictments were filed, defendants also sought dismissal of the third superseding indictment as time-barred.

## Issues

1. Whether CEA § 9(a)(2) is unconstitutionally vague as applied, including whether “manipulate” and “artificial price” fail to provide fair notice or invite arbitrary enforcement.
2. Whether CEA § 9(a)(2) reaches alleged manipulation in a physical wholesale electricity market that is also subject to federal energy regulation.
3. Whether the filed rate doctrine bars a federal criminal prosecution premised on allegedly “artificial” electricity prices in a market operating under filed tariffs and regulatory oversight.
4. Whether the third superseding indictment is barred by the statute of limitations, or instead relates back because it does not broaden or substantially amend the timely original charges.

## Decision

- The court denied defendants’ motion to dismiss the original indictment.
- The court held the CEA manipulation count was not void for vagueness as applied to alleged intentional withholding, inflated bidding, and dissemination of false information to raise prices.
- The court rejected arguments that the CEA manipulation provision could not apply to the alleged wholesale electricity-market conduct notwithstanding overlapping regulation.
- The court held the filed rate doctrine did not bar the prosecution because it was a criminal enforcement action rather than a private damages suit requiring recalculation of a lawful rate.
- The court denied the motion to dismiss the third superseding indictment, concluding it related back to the original indictment and was therefore not time-barred.

## Legal Principles

- A criminal statute is not unconstitutionally vague if persons of ordinary intelligence have a reasonable opportunity to understand what conduct is prohibited and the law does not encourage arbitrary enforcement, particularly where the charge falls within a clearly prohibited core of conduct.
- Under CEA § 9(a)(2), “manipulation” encompasses intentional conduct designed to create or maintain an artificial price; an “artificial price” may be alleged by showing divergence from prices produced by legitimate supply-and-demand forces due to deceptive or improper conduct.
- The CEA’s anti-manipulation provision is not limited to exchange-traded futures; it can reach willful manipulation of the price of a commodity in interstate commerce, including manipulation of a physical spot market.
- The filed rate doctrine generally precludes private damages claims premised on hypothetical alternative rates, but it does not bar federal criminal prosecution for manipulative conduct where the case does not require the court to set or award damages based on a “lawful” rate.
- A superseding indictment filed after the limitations period is timely if it relates back to a timely indictment and does not broaden or substantially amend the original charges; clarifications and refinements based on the same core scheme may relate back.

## Conclusion

The court allowed the prosecution to proceed, holding that the CEA’s criminal manipulation prohibition provided adequate notice as applied to alleged intentional conduct creating an artificial electricity price, that overlapping energy regulation and the filed rate doctrine did not preclude the charges, and that the third superseding indictment was timely because it did not materially expand the original, timely allegations.


United States v. Reliant Energy Servs., Inc., 420 F. Supp. 2d 1043 (N.D. Cal. 2006)