Court: Calif. entitled to new hearing on energy refunds
SACRAMENTO -- Federal energy regulators improperly calculated how much money
energy companies should refund to California consumers, and the state should get
another chance to argue for $2.8 billion in overcharges on electricity sales in
2000, an appeals court said Thursday.
In a long-fought victory for Attorney General Bill Lockyer, the 9th U.S. Circuit
Court of Appeals said that the Federal Energy Regulatory Commission "abused
its administrative discretion" when it declined to bill the power sellers
for improperly reporting the wholesale rates they charged at the height of the
state's 2000-01 energy crisis.
Lockyer said the court agreed with California's argument that "the watchdog
was sleeping during the robbery, it failed to enforce its own rules, and it
unduly restricted remedies for consumers with artificial chains."
The quarterly reporting requirements at issue are the government's main
mechanism for regulating the power industry, but the safeguard "was, for
all practical purposes, nonexistent while energy prices skyrocketed and rolling
brownouts threatened California's businesses and citizens," the appeals
court said.
The three-judge panel declined, however, to order further refunds on its own,
but instead remanded the case to FERC for further proceedings.
California has asked FERC to order $9 billion in refunds; FERC has said that's
more likely to be around $3 billion - the estimated amount overcharged on sales
between Oct. 2, 2000, and June 20, 2001.
The commission had rejected California's bid to expand the refunds to include
sales made between May and October 2000, a period in which energy companies
failed to file the quarterly rate reports. FERC said the failure to file those
reports amounted to "essentially a compliance issue." To remedy that,
FERC said it could only order the refiling of those reports.
The appeals court disagreed, saying FERC had "broad remedial authority to
address anticompetitive behavior" and had ordered refunds in other cases
where wholesale energy companies failed to file the quarterly price reports.
FERC spokesman Bryan Lee said the commission welcomed "the court's
clarification of the scope of the commission's remedial authority" for
violations of the rate rules.
State Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said the idea
that FERC believed it "lacked the ability to order a remedy has always
seemed ridiculous to me."
"That's just an invitation to rip off customers and hope you don't get
caught," said Bowen, D-Marina del Rey. "Cheaters figure out new ways
to cheat the system and FERC has to have a way to go back and provide redress
for illegal behavior."
The court decision was hailed as a victory by Gov. Arnold Schwarzenegger, who
called the court's ruling "fantastic," and U.S. Sen. Dianne Feinstein,
D-Calif. Both urged the commissioners to act quickly on California's refund
request.
California has alleged that it was the victim of widespread manipulation of both
the price and supply of energy in a newly deregulated electricity market. As
prices soared, the state faced energy shortages and rolling blackouts. The
crisis cost the state billions of dollars and disrupted energy markets across
the West.
FERC capped wholesale power prices and instituted other changes in June 2001
that brought a quick end to the crisis. But by then, the state's largest utility
had filed bankruptcy and two others had billions in debts. The state of
California also rang up billions in debts after it stepped in to help the
utilities buy power for their customers.
The agency ordered energy companies to refund $3.3 billion, but California wants
the federal regulators to order more refunds from the companies, which include
several subsidiaries of Enron Corp. and Mirant Corp. The companies have denied
wrongdoing.
Mirant and Enron have declared bankruptcy, which complicates the collection of
any refunds.
"How much of the that total we would be able to recover, we don't know. But
I would expect that most of the companies are in good financial condition,"
said Ken Alex, the attorney leading the attorney general's energy task force.
The case is California v. FERC, 02-73093.
---
To subscribe or visit to go: http://www.heraldtribune.com/