Bid for Power Refunds Heard
Apr 14 - The San Diego Union-Tribune
In the latest court battle over the California energy crisis, lawyers for San Diego and the state of California asked a federal appeals court yesterday to order $6 billion in refunds from power companies that allegedly rigged the market in 2000 and 2001.
And the Federal Energy Regulatory Commission, or FERC, which has already
ordered $2.9 billion of refunds, has balked at ordering any more, arguing that
the federal courts have no jurisdiction in the case.
"You do not have authority to review how we settle a case or how we
dealt with past conduct," FERC attorney Dennis Lane bluntly told a
three-judge panel of the 9th U.S. Circuit Court of Appeals. It held a special
hearing at the Joan B. Kroc Institute for Peace and Justice at the University of
San Diego.
The lawsuit emanates from the California energy crisis, in which some of the
country's leading energy suppliers manipulated power orders and supplies to
create shortages and push the price of electricity through the roof.
Audio tapes of traders from Enron and Reliant Energy from 2000 and 2001 have
them boasting about manipulating the market. Electricity prices in some regions
tripled or quadrupled during the crisis, which included rolling blackouts
throughout the state.
The California government estimates that state utilities and consumers were
overcharged $9 billion during the crisis, based on the difference between what
the state was being charged and the fair market value of the power.
In partnership with Southern California Edison and Pacific Gas &
Electric, which was pushed into bankruptcy during the crisis, the state has
spent the past three years pushing power suppliers to give back some of the
money they took in at the time.
"Equity and just and reasonable principles demand we get paid,"
Stan Berman, a lawyer representing the state, told the 9th Circuit panel.
"For a long time, (San Diego) citizens have been seeking justice,"
said attorney Robert A. O'Neil, representing the city.
But FERC has so far given the state only a third of what it has requested.
The commission has declined to order any rebates for energy purchases before
October 2000.
In San Diego, which was the first market to deregulate, the energy crisis
began in May 2000, and the state estimates that $2.8 billion in overcharges
occurred before October.
In addition, FERC has declined to order $3.5 billion in refunds to the state
Department of Water Resources, which was forced to buy power at the peak of the
crisis to prevent the state's energy network from collapsing.
In yesterday's hearing, attorney Lane argued that FERC had "absolute
discretion" over deciding what remedies to provide and that the courts
could not tell it what to do.
That did not sit well with the judges, some of whom had flown to San Diego
specifically for the energy case.
Judge M. Margaret McKeown -- a San Diego-based judge with the 9th Circuit --
asked Lane a hypothetical question: If FERC decided that it would only prosecute
companies whose name began with the letter "S," would the courts have
the right to review that decision?
"The way we read the law is that such a decision would not be reviewable,"
he said.
"So in your view, we may as well just pack up our notebooks and go
home," McKeown said. "That's exactly what you want us to do."
"In our view, that's exactly right," Lane said, provoking laughter
from the audience.
Erik Saltmarsh, chief counsel of California's Electricity Oversight Board --
one of the state agencies suing FERC -- questioned whether Lane's assertions
would play well with the judges.
"In general, courts tend to assert that the judiciary does have an
oversight role when it comes to administrative decisions," Saltmarsh said
after the hearing concluded.
Meanwhile, attorney David Frederick, representing such energy suppliers as
Sempra Energy Trading, Portland General Electric and Puget Sound Energy, told
the judges that the charges of market manipulation were based on "largely
false charges" involving a handful of suppliers.
Even if there was market manipulation, Frederick argued, Congress decided
decades ago that rebates were not an appropriate remedy.
"The reason is to provide comfort to the investors," Frederick
argued.
But Judge Richard Clifton responded that when Congress opined against
rebates, it was in an era when the utilities were tightly regulated, so utility
shareholders had a right to expect a predictable return on their investments.
"It's one thing to talk about investor confidence when you have fixed
(utility) rates," he said. "But it's another thing when you're talking
about market-based rates. Investors don't know what the market-based rate is
going to be."
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