Bill would tell Pentagon to review energy contract

The fiscal 2005 Defense appropriations bill includes language calling on the Department of Defense to re-examine a $36 million contract it awarded to a subsidiary of Reliant Energy, Sen. Dianne Feinstein, D-Calif., said Thursday.

Reliant, accused of manipulating western energy markets, was indicted in April. A House-Senate conference committee approved the bill calling for another look by the Pentagon late Wednesday, and it is expected on the House and Senate floors next week.

"Reliant should not be rewarded with a $36 million contract after taking advantage of California's energy customers who continue to pay for the company's transgressions," Feinstein said in a statement. "Not only has Reliant been indicted by a Federal grand jury, but it has been fined by the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission as well for manipulating and gaming Western energy markets."

Citing a federal acquisition regulation that authorizes the suspension of any contract awarded to a company that shows a lack of integrity or honesty, the bill calls on the Defense Department's inspector general to review the contract and take any necessary action against Reliant Energy and its subsidiaries. The inspector general has 180 days from enactment of the conference report to provide its findings to the Appropriations Committee.

In May the Pentagon awarded an electricity contract to Reliant Energy Solutions East, a subsidiary of Reliant Energy. The contract was awarded one month after Reliant Energy Services was indicted for its role in the California energy crisis.

Feinstein questioned the $36 million contract in a June 24 letter to the Defense Department. In response to Feinstein's concern, the Defense Department asserted Reliant Energy Solutions East was eligible for the contract because it was not indicted.

Lynette Ebberts, communications director for the Pentagon's Defense Energy Support Center, which awarded the contract, said the indictment specifically addresses Reliant Energy Services and four individuals, none of whom have a relationship with Reliant Energy Solutions East. In a statement, center officials said they were aware of the indictment at the time of award, but the contracting officer had made a judgment call in favor of the subsidiary.

"In the opinion of the DESC contracting team, Reliant Energy Solutions East is a responsible contractor," DESC officials said in the statement. "There are no grounds for termination of Reliant's contract for cause or convenience."