United States v. Reliant Energy

Reliant Energy Services, Inc. (Reliant) (defendant), a Texas company, owned five electricity-generation plants in southern California. In early June 2000, a Reliant employee entered into long-term trading contracts for the delivery of electricity in the third quarter of 2000 and 2001. Later that month, however, the price of electricity dropped unexpectedly, leaving Reliant with the significant possibility of facing a substantial loss. To avoid or mitigate the loss, Reliant employees allegedly conspired to manipulate the market for electricity in California. Specifically, Reliant intentionally shut down some of its power plants, physically withheld electricity from the spot market, submitted inflated bids to the statewide electricity-exchange platform, and spread false rumors implying that Reliant’s power plants would have near-term difficulty supplying electricity to southern California. These efforts succeeded, causing a sharp increase in the price of electricity in the southern California market. Reliant not only avoided the previously expected loss, but in fact it made millions in profits. The federal government (plaintiff) charged Reliant and four of its employees (defendants) (collectively, Reliant) with multiple criminal counts, including commodities price manipulation in violation of the Commodity Exchange Act (CEA). Reliant moved to dismiss the commodities-price-manipulation count on the ground that it was unconstitutionally vague. Reliant pointed to the fact that there had never been a criminal prosecution for commodity price manipulation in the 68 years since Congress passed the CEA, suggesting that such prosecution was improper. As to the statutory language itself, Reliant also argued that there was no ordinary or plain meaning to the term manipulate, and neither judicial decisions nor legislative history provided sufficient explication of what the term might mean. To the extent the term manipulate reflected the existence of an artificial price, Reliant also argued that the term artificial price was also vague on its face.