Constellation Loses Bid for $10MM in CalPX Hands

By Published On: July 21, 2006

An attempt to force the bankrupt California Power Exchange to release settlement funds was rejected by the U.S. Court of Appeals, D.C. Circuit, July 18. Constellation Energy challenged federal regulators’ approval of CalPX holding on to $10 million that the utility could ultimately be charged for transactions during the 2000-01 energy crisis. Pacific Gas & Electric and Southern California Edison intervened on the other side, claiming that $10 million might not be enough to settle claims. In a separate case, Powerex challenged the Federal Energy Regulatory Commission on the same “charge-back” issue. The court found that FERC was within its rights to allow CalPX to hang on to the money in both cases while debts are still being sorted out in bankruptcy court. “We pick up the ‘long, detailed, and tortured’ history of the California energy crisis in the mid 1990s,” wrote the court. When the crisis hit in 2000, Constellation and Powerex were paying their CalPX bills. But PG&E and Edison were unable to pass the high cost of power on to ratepayers and plowed through their cash reserves, leaving Edison teetering on bankruptcy and PG&E claiming Chapter 11 protection – even though it retained some funds. CalPX required collateral from paying participants in the deregulated market. Constellation claimed that it should have returned the $10 million in collateral in 2002 because it wasn’t needed. Federal regulators disagreed, maintaining that potential refunds could increase. The court sided with FERC, concluding that the commission “rationally interpreted and implemented the CalPX tariff.”

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