The troubled power sector continues to rewrite its past -- and recast the players for its future.



announced late Friday that it has turned up more false profits during an extensive re-audit of its books. Meanwhile,

Reliant Resources


followed up late Sunday with news that its embattled CEO is on his way out the door.

Both stocks edged up slightly on the changes.

After months of scrubbing, Dynegy has declared that it finally has unearthed clean financial statements for periods tainted by


-era dirt. A multiyear audit, just completed by PricewaterhouseCoopers, washed away $19 million worth of profits that were recorded when industry favorite Arthur Andersen was blessing Dynegy's books.

But Dynegy is clearly looking forward instead of backward -- and directing others to do the same.

"These filings provide an accurate picture of our business and operating results for the periods presented," Dynegy CEO Bruce Williamson said. "Our stakeholders have a benchmark for our future performance and, importantly, an assurance that we have disclosed and properly accounted for past business."

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The Long Run

The latest bookkeeping errors began before 1999 and continued through 2002. To eliminate the $19 million in improper profits -- and correct previously announced mistakes -- Dynegy has filed restated financial results for 1999 and beyond. The company also filed audited financial statements for 2002, reporting a $2.8 billion loss that is slightly larger than the $2.74 billion loss it announced on Jan. 31.

The market shrugged off the restatement, pushing the stock up 5 cents to $2.67 in early trading. But industry critic Karl Miller said investors have no real reason to celebrate yet.

"The market has absolutely no confidence in any of the financial reporting for the U.S. power and gas merchants," said Miller, a former industry executive who now leads an energy-related acquisition firm. "If

management is not credible, competent and honorable, the system completely breaks down."

Reliant Resources has become the latest player to sacrifice its top executive in an effort to win investors back. The Houston energy company announced just before midnight Sunday that longtime CEO Steve Letbetter is calling it quits to "pursue new opportunities." Reliant director Joel Staff will step in to fill Letbetter's shoes as chairman and CEO until a permanent replacement can be found.

"The company is well-positioned to deliver a successful future," Staff said. "Our core businesses are performing well in a difficult environment with substantial upside as markets improve."

The market yawned at the change, nudging Reliant's stock up 6 cents to $4.41 in the morning session.

Well-Timed Exit

News of Letbetter's exit comes less than a month after Reliant inked a critical multibillion-dollar financing package that, at one point, appeared threatened by slaps from federal regulators. Last month, the Federal Energy Regulatory Commission singled out Reliant out for particularly harsh punishment -- threatening the company's future in wholesale trading -- because of alleged wrongdoing during the California energy crisis of 2000-01. Reliant has denied any improprieties but must fully prove its innocence to escape serious retaliation from FERC.

Given Reliant's challenges, Miller said, Letbetter's exit should come as no surprise.

"How long does it take to remove management that has committed fraud and completely destroyed shareholder value?" Miller asked. "Reliant Resources needs an entirely new management team parachuted in from outside the company."

Meanwhile, three former Dynegy executives are fighting for the parachutes they had expected to sail out on. In addition to audited financial statements, Dynegy's latest regulatory filings reveal that the company's former CEO, CFO and president are seeking a combined $42.5 million in severance pay. Ousted CEO Chuck Watson is demanding the biggest chunk -- $28.7 million -- of that amount.

Dynegy claims it should pay substantially less to the booted executive team. The company's stock, which soared above $50 under Watson's leadership, plummeted to a record low of 49 cents a share shortly after his departure.

Since then, they stock has regained some ground with a rally that has more than doubled its price this year.