Cleanup continues of the three-ring energy crisis circus of 2000-01. In ring No. 1--At breakneck speed, the state penned $40 billion-plus in secret contracts a decade ago. In ring No. 2--Sad clown investor-owned utilities agreed to having customers hand over checks to pay off $11 billion in state bonds to cover power sent to their territories. Trumpeted as the biggest state bond issue at that time, the California Treasurer’s tightrope walker used the debt to cover part of the cost of the state’s power contracts when investor-owned utilities became cash poor and a swooning Pacific Gas & Electric fell to the bankruptcy sawdust and was carted off in an ambulance. In ring No. 3--Illusionists, including Enron, some unregulated generators, including investor-owned utility affiliates, and Senators Steve Peace and Jim Brulte--coauthors of the state’s deregulation scheme--tried to defy the economic law that what goes down may come back up. Like most 1930 Depression-era circuses covered in the book Water for Elephants, they’re history. Those left in the audience have one hand clapping. Martin Goyette, supervising deputy Attorney General, may not know how much water an elephant can drink but he knows ratepayers still owe $7.7 billion in state bonds. The utility bills of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric customers will include bond expenses until 2022. There also are costs that DWR’s power buying division, the California Energy Resource Scheduling (CERS), incurs for the crisis circus tent it put up when the deregulation train came to a screeching halt. For example, it estimates that next year it will pay $74 million in power contract fees. The tab rises to nearly a billion dollars in 2012 when adding in $882 million in expenses for DWR’s state bond-related costs, according to CERS filings with the CPUC. DWR’s contract claims entail only a handful of the remaining long-term energy crisis agreements. Of those, all but one terminates at the end of 2012. One of the most controversial crisis deals took its final bow last month. The 10-year, $8 billion deal between the state and Sempra Generation, which was the subject of several law suits and arbitration claims, terminated Sept. 30 at midnight. “There was a huge sigh of relief,” said Richard Grix, CERS assistant director, at the end of the controversial baseload electricity supply agreement for 1,900 MW. Like backstage circus performers--two and four legged--there were nasty fights over where the power came from. Sempra was accused of using sleight of hand to violate the deal because it bought power on the market instead of building a simple peaker as called for in the agreement. Other allegations included whether Sempra intentionally jammed transmission lines by sending too much power into the grid from its Mexicali plant in Mexico. A key Sempra Generation negotiator complained that he spent 80 percent of his time the last several years litigating the matter instead of growing tickets sales. Then again, the utility affiliate is one of few performers that survived the energy crisis. An ongoing act that may bring applause from utility customers and the state is that a few days after the Sempra deal ended, federal regulators agreed to reconsider whether other crisis contracts were unreasonable. The Federal Energy Regulatory Commission ruled Oct. 3 it would consider additional evidence as to whether market manipulation drove up the cost of bilateral spot market deals the state made with the Pacific Northwest between January and June 2001. A settlement judge is to be appointed by end of the third week in October to try to resolve the matter. If wrongdoing is found, the contracts will be thrown off the train. The state could be awarded up to $1.75 billion, with $1 billion in refunds and $750,000 in interest, Goyette said. The first lawsuit charging unjust prices was filed in 2000. Later, SDG&E filed a complaint with FERC. In 2001, a commission administrative law judge found no evidence of market manipulation, concluding the market was competitive. The next year, litigating parties filed to reopen the record in this proceeding. Then, in June 2003, the initial administrative law judge’s findings were affirmed by FERC. The complaint landed next in the Ninth Circuit Court of Appeals. Four years later, in 2007, the appellate court held that FERC was required to consider new evidence that may show market manipulation in the Pacific Northwest market and to delve into whether refunds were warranted. Earlier this month, FERC said it was appointing a commission judge to hold settlement talks. The judge is to report back to the commission in early November. If that effort is unsuccessful, FERC stated it will hold a trial-type hearing. “The Federal Power Act requires just and reasonable rates, and the rates in question far exceed the just and reasonable level found by FERC for this period in the organized markets,” said supervising attorney general Goyette, who like many of the parties, has been working in the Big Top since the crisis. By the next decade or so, many of the long-time litigants and spectators may end up like the cranks in the old folks’ home in Water for Elephants, arguing about carrying water for power pachyderms.
