Court Backs California's Push for Energy Refund From Electricity Suppliers
Sep 10 - The Sacramento Bee
Sep. 10--Federal regulators were too timid in taking control of California's runaway energy market, and now the state should have another chance to push for billions more in refunds, a federal appeals court ruled Thursday.
"It's a huge victory for California ratepayers," Lockyer said in a
telephone press conference.
The decision, welcomed by Gov. Arnold Schwarzenegger as
"fantastic," doesn't guarantee any more money for Californians who
paid dizzying wholesale electric prices during the state's energy crisis.
Instead, it holds that the Federal Energy Regulatory Commission has the
authority to order refunds, and it orders FERC to begin proceedings into how
much more money California is owed.
Power suppliers can be expected to fight vigorously against further refunds
at those hearings, and one key generator -- Mirant Corp. -- is in bankruptcy
court and would need a judge's approval to pay up.
If California prevails, it would still be years before any money could reach
the state's consumers, probably in the form of one-time discounts or lowered
electric bills for customers of the three most affected utilities, Pacific Gas
and Electric Co., Southern California Edison, and San Diego Gas & Electric
Co.
Once that happens, Lockyer speculated that a bigger share of any refunds
would be likely to flow to big businesses, because business and commercial
consumers overpaid "three or four times as much" as residential
customers during the crisis.
Thursday's ruling could be one of the most significant yet to come out of the
roughly 100 lawsuits that the state attorney general's office has brought in the
wake of California's energy crisis, Lockyer said.
But electricity marketers said the decision just opens the door to further
turmoil at exactly the wrong time -- when California needs to begin encouraging
more power plant construction.
"This has dragged on for four years now," said Jack Hawks of the
Electric Power Supply Association. "The last thing that California needs is
more uncertainty."
The FERC praised one key portion of the 9th Circuit ruling, which validated
that it had the authority to set up market-based electric rates as part of
California's foray into deregulation.
Commission spokesman Bryan Lee said the agency will thoroughly evaluate what
should happen next under the court's order, but welcomed the decision for giving
it "another tool to try to provide justice during that period when markets
went awry."
California's September 2002 lawsuit against FERC argued that federal
requirements for "just and reasonable" electricity rates precluded the
kind of competition that FERC approved for California.
In addition, the state argued that if market rates were allowed, FERC should
have been much more aggressive in insisting that power marketers file detailed
reports with the commission on their transactions to ensure that rates stayed
fair.
The appeals court rejected the first part of that argument but embraced the
second, holding that FERC couldn't possibly enforce fair rates without seeing
detailed filings from electricity vendors -- filings it often had not received.
"Despite the promise of truly competitive market-based rates, the
California energy market was subjected to artificial manipulation on a massive
scale," the court held. "With the FERC abdicating its regulatory
responsibility, California consumers were subjected to a variety of market
machinations."
California has long maintained that it can prove it was overcharged by at
least $9 billion because of market manipulation from mid-2001 until mid-2002. In
earlier rounds of hearings, though, the FERC had estimated that California can
only make a case for about $3 billion.
There were two key reasons for the $6 billion discrepancy. Federal regulators
disallowed about four months of refunds early in the crisis, and excluded
certain kinds of trades from refunds.
Lockyer and others believe the four-month exclusion, accounting for about
$2.8 billion in refunds, definitely will be reconsidered by FERC and the
excluded trades, worth another $3 billion, could be reopened.
So far, California has not collected any of the $3 billion that FERC is
considering refunding, but it has negotiated roughly $800 million to $1 billion
in settlements with various power marketers.
California lawmakers and utilities on Thursday heralded the court's decision,
and urged federal regulators to move quickly.
The ruling "validates what California has been saying for nearly four
years" said state Sen. Debra Bowen, D-Marina Del Rey, in a prepared
statement. "But we'll see whether FERC actually tries to do its job and has
any luck squeezing money out of these companies four years after the fact."
Of the $2.8 billion that seems likeliest to come under renewed FERC review,
Mirant Corp. accounts for about $350 million, according to those familiar with
California's claims.
U.S. Sen. Dianne Feinstein said the decision "now paves the way for FERC
finally to act," and wrote FERC Chairman Pat Wood Thursday encouraging a
quick response.
By Carrie Peyton Dahlberg and Dale Kasler
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