Dynegy Settlement Includes $51 Million for Pre-October Allegations

Federal regulators have reached a settlement with Dynegy and partner NRG Energy for $267 million. Part of the deal announced October 25 is $51 million for pre-October 2000 allegations?concerning a time period that the Federal Energy Regulatory Commission previously did not consider for refunds. The $216 million balance includes refunds for alleged market manipulation, as well as $8 million to the negotiating parties, $3.6 million to the Department of Water Resources, and $3 million from a prior settlement. ?The ratchet keeps going up,? Pat Wood, FERC chair, told Circuit . Wood said the Dynegy settlement will likely affect other settlements stemming from the California energy crisis. Generators that played hardball with California are expected to get hit the hardest by the Ninth Circuit Court of Appeals ruling, he added. That ruling held that the federal regulators must consider alleged overcharges that occurred prior to October 2000. If there is one message from the Ninth Circuit, ?it is settle, settle, settle,? Wood said. After initially being less than thrilled with the court ruling, Wood now publicly embraces it for promoting settlements over litigation, allowing consumers to reap refund benefits sooner, and moving businesses beyond the energy crisis battles to ?reengage in a positive way.? Final settlements (see sidebar below) that do not prohibit a reopening of the deal could also be affected by the decision. This is the first settlement that includes the pre-October 2000 period. Last month, the Ninth Circuit Court of Appeals instructed FERC to consider refunds for California prior to that time. The commission had argued it lacked the authority to consider refunds over that period ( Circuit , September 10, 2004). FERC decided not to appeal the Ninth Circuit?s ruling because it upheld the commission?s market authority, ?considered the most important aspect of the case,? said commissioner Joe Kelliher. ?The decision is curious but not curious enough to appeal.? The settlement allows Dynegy to ?collaborate with the state to build an energy infrastructure that will provide long-term benefits to all stakeholders,? ending a ?significant amount? of the litigation over alleged manipulation, stated Bruce Williamson, Dynegy chair, president, and chief executive officer. West Coast Power?Dynegy?s joint venture with NRG?owns older power plants, mainly on the Southern California coast. The contracts for their output with DWR expire at the end of the year. The company is attempting to find a way to make the plants profitable after the contracts expire. Officials from both companies have said they expect the state?s market to improve but are also aware of the power plants? prime real estate and the potential for exploiting the location for other uses. Elizabeth McCarthy also contriuted to this report. Federal Energy Regulatory Commission Settlements to Date Major fines and settlements with energy traders and sellers thus far include: October 25, 2004: $267 million FERC settlement with Dynegy and partner NRG Energy in West Coast Power. The first settlement that includes the pre-October 2000 time frame, it incorporates $3 million from an earlier settlement. July 22, 2004?$32.5 million forfeiture ordered for Enron for unjust profits. The commission said Enron violated its market-based rate authority. July 13, 2004?$207.5 million from Duke Energy. Of that, $16.6 million was earmarked for the Department of Water Resources for its out-of-market purchases to cover Duke. Assigns $140 million owed Duke by the California Independent System Operator and the California Power Exchange and $60 million in cash. July 2, 2004?Forgives $137 million that Williams Energy claims it was owed by California utilities. Utilities to transfer to Williams more than $100 million sitting in escrow at the former California Power Exchange. January 20, 2004?$3 million from a Dynegy/NRG Energy joint venture for alleged 2000-01 manipulation. The venture, West Coast Power, is set to pay into a U.S. Treasury fund for California and other Western consumers. November 14, 2003?$7.9 million for Coral Power proposed by commission staff. November 13, 2003?$1.6 billion settlement for El Paso allegedly withholding gas supplies, causing prices for gas to make electricity prices rise during the energy crisis. October 31, 2003?$7.2 million for Sempra Energy Trading, largely for settling allegations of ?Get Shorty? transactions?selling ancillary services where none may have existed. Early October 2003?$50 million for Reliant Resources to settle most gaming allegations. September 2003?$332,000 for Mirant for potential profits for cutting nonfirm power, circular scheduling, load shifting, and paper trading. August 2003?About $2 million in total settlements with American Electric Power, Aquila, Morgan Stanley Capital Group, PacifiCorp, Portland General, Puget Sound Energy, Reliant, Redding, San Diego Gas & Electric, and Williams Energy. July 2003?$15.5 million for El Paso Electric along with FERC suspending its market-based rate authority for more than two years. January 2003?$13.8 million settlement between FERC and Reliant Energy for withholding energy from the grid. December 2002?$417 million settlement with Williams by the California attorney general for investigations and lawsuits. July 2002?$122 million in penalties levied by the California Independent System Operator for not following dispatch orders. Dynegy, Reliant, and Williams got the harshest judgments. April 2002?$6 million AG settlement with Calpine on enforcement issues. April 2002?$2.5 million AG settlement with Constellation on enforcement issues. March 2001?$124 million in refunds granted by FERC through CAISO for bids over the price cap. April 2001?$8 million settlement between FERC and AES/Williams on withholding. July 1999?$57 million in payments made to suppliers beginning in 1999 rescinded by CAISO for failure to dispatch.

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Dynegy Settlement Includes $51 Million for Pre-October Allegations

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