Feds ordered to reconisider 2001 California public power fleecing

By Julia Cheever, Bay City News Service

December 20, 2006

SAN FRANCISCO (BCN) - A U.S. appeals court in San Francisco yesterday ordered the Federal Energy Regulatory Commission to reconsider a state agency's claim that California was overcharged $1.4 billion in several long-term electricity contracts in 2001.

California Public Utilities Commission President Michael Peevey said the court ruling by the 9th U.S. Circuit Court of Appeals was "a big victory for the PUC and California's consumers. The ruling puts another $1.4 billion back on the table for California's consumers."

During the state's energy crisis in 2001, the California Department of Water Resources negotiated power contracts with five wholesale suppliers, including San Diego-based Sempra Energy and Houston-based Dynergy Power Marketing Inc. Consumers pay for the contracts through increased electricity rates.

After electricity prices began to fall in mid-2001, the state PUC sought to have the contracts modified, but FERC, the federal panel regulating wholesale energy rates, turned down the claim in 2003. The PUC then appealed to the 9th U.S. Circuit Court of Appeals, which ruled that FERC used an incorrect interpretation of two 1956 U.S. Supreme Court decisions when it turned down the PUC claim.

Peevey said the ruling "revolutionizes the law" on the application of the high court decisions to power contracts by making clear that a contract with a wholesale rate exceeding "a zone of reasonableness" affects the public interest.

FERC spokesman Bryan Lee said the commission has the ruling "under review and will respond in due course."

Sempra Energy intervened to become a party in the case. Sempra's general counsel, Javade Chaudhri, said: "We are still reviewing the court's decision and whether we will seek further appellate review of this ruling."

Chaudhri added, "We believe the contracts were and are beneficial to the state of California and should be upheld under whatever standard the FERC ultimately applies."

Copyright © 2006 by Bay City News, Inc. -- Republication, Rebroadcast or any other Reuse without the express written consent of Bay City News, Inc. is prohibited.

####