Laws Hindering Power Crisis Refunds

Laws Hindering Power Crisis Refunds

Jul 26 - Daily Breeze

SACRAMENTO -- State and federal energy laws and regulations are stacked against California officials who are seeking refunds for overpriced electricity during the energy crisis, a report by the California attorney general released Tuesday concluded.

Federal energy regulations continue to create "enormous incentives on the part of generators to try and create an energy crisis in the future because of the massive potential for profits" and lax enforcement of the rules, said Ken Alex, a deputy attorney general.

"At least part of the energy crisis, we believe, has been caused by the abuses of the deregulated market," said Alex, who headed Attorney General Bill Lockyer's energy task force. He singled out electricity generators accused of manipulating the wholesale energy market to drive up prices, saying their games "created a dysfunctional system."

The state seeks $9 billion in refunds for overcharges in the 2000- 01 energy crisis, when prices hit record highs. The Federal Energy Regulatory Commission, which oversees wholesale energy markets, has ruled that the state is due about $3 billion.

"I think it's fair to say that three years after the end of the energy crisis, we are frustrated that we haven't recovered some of the billions of dollars Californians were overcharged," Alex said.

FERC spokesman Bryan Lee disagreed with Lockyer's assessment of both the cause of the energy crisis and how federal regulators reacted to California's plight.

The commission "has done everything within its legal authority to rectify the unjust and unreasonable prices that occurred in 2000 and 2001," Lee said, pointing to more than $100 million in FERC-ordered refunds.

Lockyer's report was correct in saying laws would have to be changed for FERC to go beyond what it has already done, Lee said. However, the report "conveniently downplays the state's own culpability in insisting upon a fatally flawed market design."

FERC also took issue with the report's finding that price spikes were due to market manipulation, Lee said.

The 1996 deregulation law was designed to open the wholesale and retail electricity markets to competition. Utilities sold many of their power plants, and then bought wholesale power through a day- ahead market. Eventually, utilities would be allowed to raise or lower customers' rates based on wholesale prices.

But wholesale rates soared in 2000, before most utilities could escape a retail rate cap imposed by state regulators as part of the deregulation law. The utilities then ran up huge debts, requiring the state to step in and buy wholesale energy on their behalf.

Among the changes Lockyer's report proposes is the elimination of the federal "filed rate doctrine," which states that once a wholesale electricity seller files its rates with FERC, that rate cannot be challenged retroactively.

For far more extensive news on the energy/power visit: http://www.energycentral.com .