AG Lockyer Says No Competition for Now

By Published On: April 24, 2004

Focusing attention on his recent report to federal energy regulators on correcting oversight of state markets, Attorney General Bill Lockyer said California should halt any forays into direct access until protective rules are in place. Lockyer made his recommendation to the Senate Energy, Utilities and Communications Committee April 22, where he also blamed the Federal Energy Regulatory Commission for the uncertain status of energy crisis?related refunds. ?Unless there are more adequate provisions for consumer protection, I wouldn?t deregulate anything,? Lockyer told committee chair Debra Bowen (D-Redondo Beach). ?I would insist that the federal system be improved and strengthened before further market-based rate experiments be allowed.? California?s effort to get the correct market rules established could end up in the U.S. Supreme Court, Lockyer said, a venture he is willing to pursue. The state AG?s office last week issued a report to FERC arguing that the agency should put out to pasture the ?filed rate doctrine? (see <i>Circuit</i>, April 16, 2004). According to Lockyer, the doctrine protects large companies from litigation over excessive prices, is ?archaic,? and is inapplicable in the age of deregulation. Under current federal guidelines, California?s energy market resembles an ice hockey rink, Lockyer said?with 20 teams playing at the same time without rules. Complicating the matter is the ominous projection that energy demand worldwide over the next two years will advance by one-third. Until safeguards against anticompetitive behavior are set??with [the players] bashing each other and mostly stealing money from the audience??the state could be heading for another downward power spiral, he warned. As Lockyer derided FERC for failing to use its authority to stop the crisis and to order refunds in its aftermath, Senator Bowen took note of the agency?s light treatment regarding alleged crimes by Reliant and Duke. The commission settled with those companies regarding offenses that appear to be receiving harsher review from other U.S. agencies. Reliant has been indicted by a federal grand jury for its role in the California crisis. On April 21 three former Duke Energy traders were indicted for racketeering and wire fraud as part of a bogus trading scheme. ?FERC has spent the past four years walking around like a referee that swallowed its whistle,? Bowen said. According to Deputy Attorney General Vickie Whitney, of more than 70 refund-related proceedings now active at FERC, settlements have totaled about $40 million to date. Lockyer claimed that the commission?s ?failure to obey the law? is costing the state $6 billion in remuneration. Part of the problem is the piecemeal approach used by federal regulators in addressing energy crisis fallout, Whitney added. Electricity sellers accused of misbehavior are required to disgorge profits for a single flawed transaction made at a specific time, but all other sellers who were paid the same price as a result of that deal?thereby affecting the entire market?are in the clear. ?It?s like the six blind men touching the elephant,? Whitney said of FERC?s detached approach. ?Each one feels a different part, but they never get a full picture of what the elephant looks like??and in the refund case, no appropriate remedy takes shape. FERC has yet to render a decision on the state?s refund claims. Lockyer also called for utility companies operating in California to be subject to state antitrust laws. Senator Joe Dunn (D-Garden Grove), seen by many in the energy community last year to be vying for the post of attorney general himself, agreed and suggested these measures be updated to give the AG?s office more power in prosecuting market violations. Proponents of competition had their own views. ?The crisis of 2000-2001 was not due to competition. Therefore, saying that if you reinstate retail choice the crisis will recur is absolutely false,? said Gary Ackerman, Western Power Trading Forum executive director.

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