FERC's Latest Settlements Reflect Dwindling Dollar Signs

Federal regulators may be running out of ammunition against companies that allegedly gamed California's deregulated market during the energy crisis if the latest rash of settlements is any indication. The Federal Energy Regulatory Commission ordered more than 40 companies to "show cause" why they shouldn't have to repay Californians. Out of those cases, 10 were settled and 16 dismissals were requested. The rest have until November 3 to conclude discussions. The amounts in the current batch of settlements are a fraction of what was recovered in earlier cases (see "Past Settlements and Fines" below), totaling about $2 million. The state administration, however, continues to allege that energy companies bilked Californians of nearly $9 billion. Unofficial amounts reached by the California Independent System Operator (CAISO) and energy companies in FERC discussions earlier this year were hovering around $1.1 billion. Tallying the most recent settlements with earlier ones, along with fines, energy companies are returning less than $1 billion. "I think the $8.9 billion figure?may be a very conservative lower bound," said Frank Wolak, Stanford professor and head of CAISO's market surveillance committee. His computations of the exercise of "unilateral market power" from June to October 2000?only three months out of the year?and-half-long crisis?add up to $4.44 billion. The settlements include: - American Electric Power: $45,240 for congestion revenues. - Aquila: $75,975 for allegedly parking energy outside the state. - Morgan Stanley Capital Group?$857,089 for allegedly cutting non-firm power and circular scheduling. Public Service New Mexico was contracted as a source and/or sink to hedge long power positions for transactions. The time period was May through August 2001, using PSNM service up to 11 times. - PacifiCorp: $67,745 for congestion revenues in October 2000. FERC also alleged the company earned $12.08 from cutting non-firm power during the same time, but that amount was not challenged. - Portland General: $12,730 for allegedly cutting non-firm energy in two transactions, for a total of 127 MWh. - Puget Sound Energy: $17,092 for alleged revenue from cutting non-firm energy from January 2000 through June 2001. - Reliant: $836,000 for apparently double-selling 6,458 MW of ancillary services in June 2000, and 4,900 MW the following August. - Redding: $6,300 because the city "may have engaged in circular scheduling." A staff report indicates Redding agreed to an Enron strategy for transactions involving PacifiCorp and Enron. - San Diego Gas & Electric; $27,972 for congestion revenues. - Williams Energy Services: $45,230 for allegedly scheduling ancillary services above its capacity and circular scheduling. FERC also filed motions to dismiss allegations regarding the following entities: Anaheim, Azusa, Bonneville Power Administration, Cargill-Alliant (now Cargill Power Markets), FP&L Energy, Los Angeles Department of Water & Power, Pasadena, PG&E Energy Services, Public Service of Colorado, Public Service of New Mexico, Riverside, Salt River Project, Sierra Pacific, Tucson Electric, TransAlta Energy Marketing, and the Western Area Power Administration. "It is disheartening that they are missing the point in doing these piecemeal settlements for mainly paltry sums. They should be doing a marketwide remedy for refunds since every game impacted the market and every participant in the market benefited," said Vickie Whitney, deputy attorney general for California. The AG's office formally objected to what it called the piecemeal approach. Whitney also took exception to the proposed dismissal of LADWP's case and some others because FERC's parameters "exclude a substantial amount of bad conduct." Gary Ackerman, director of the Western Power Trading Forum, said, "It's a hell of a lot better to give the money to Californians than the attorneys." He said that things appear to be going in generators' and traders' direction, but that in this case, he couldn't figure out what FERC was going after. Ackerman noted there is one more FERC case open on refunds, but that involved money sitting in the former California Power Exchange account. Past Settlements and Fines Excluding last week's Federal Energy Regulatory Commission deals, major fines and settlements with energy traders and sellers include: Reliant Energy: $13.8 million in January 2003 for a settlement with FERC for withholding energy. Williams: $417 million in December 2002 for a settlement with the California attorney general for investigations and lawsuits. Dynegy, Reliant, and Williams: A total of $122 million in penalties levied by California Independent System Operator in July 2002 for not following dispatch orders. Calpine: $6 million in April 2002 for an AG settlement on enforcement issues. Constellation: $2.5 million in April 2002 for an AG settlement on enforcement issues. AES/Williams: $8 million in April 2001 for a FERC settlement on withholding. Various companies: $124 million in refunds in March 2001 granted by FERC through CAISO for bids over the price cap. In addition, CAISO rescinded supplier payments totaling $57 million in July 1999 for failure to dispatch.

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FERC’s Latest Settlements Reflect Dwindling Dollar Signs

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