PG&E Gains Power Plant in Mirant Settlement

In its attempt to emerge from bankruptcy court, Mirant has agreed to an estimated $750 million settlement. The settlement includes a potential transfer of the partially finished Contra Costa unit 8 power plant to Pacific Gas & Electric, as well as payments to other California utilities. In return, the company is off the hook for contributing to any potential refunds resulting from alleged market manipulation during the energy crisis. Mirant declared bankruptcy in July 2003, and the January 13 settlement may allow it to exit from Chapter 11 proceedings by the middle of this year. The agreement could put PG&E back in the power plant building business. The generator community, however, is not overly concerned. Having PG&E build Contra Costa unit 8 ?is the last page of the last chapter. We?re starting a new book,? said Gary Ackerman, Western Power Trading Forum executive director. Unlike the time Southern California Edison won the authority from regulators to build the Mountainview power plant last year, third-party power plant developers now have a safety net provided by the California Public Utilities Commission ruling that requires competitive procurement for new power plants. ?There?s a difference in attitude? between then and now, Ackerman added. Others, including The Utility Reform Network, say getting PG&E back in the power plant building business will be good for ratepayers. A segment of stakeholders fear a return to the energy crisis days and believe the utilities are less likely to gouge ratepayers. ?There are worse things than regulated utilities,? said Mike Florio, TURN senior attorney. As an unregulated developer, Mirant had to go through the California Energy Commission?s siting process for Contra Cost unit 8 but did not have to get a certificate of public convenience and necessity from the CPUC, as investor-owned utilities do. The power plant is reportedly 40 percent complete. Florio said that if PG&E does finish the plant, it will have to get the CPUC?s regulatory approval, which is assumed to necessitate some public hearings. PG&E is not the only entity to get into the power plant business as a result of a settlement over energy crisis?era refunds. In 2002, a deal with Williams theoretically allowed San Francisco and San Diego to build their own facilities without a hearing at the CPUC. In that settlement, Williams turned over peaker turbines to the city and county. The CPUC staff?s execution of the agreement continues its trend of making deals with utilities sans public input. The settlement with PG&E that brought it out of bankruptcy is the most glaring example. But other deals, such as the details used for allowing an Edison subsidiary to build Mountainview, have also been kept from the public until after commission approval. The settlement also continues the regulatory trend of allowing utilities back into the power plant building business. During deregulation, the state chose to take PG&E and other utilities out of that business, asking them to sell most of their power plants to private generators. In the past year, however, regulators have reopened the door to vertically integrated monopolies for investor-owned utilities. PG&E has claimed it wants to build 50 percent of any new power plants needed for its territory. Layered on these actions is a new procurement policy that requires competitive bids and emphasizes renewables, striving for least-cost options ( Circuit , Dec. 17, 2004). The Mirant deal, which allows PG&E to build Contra Costa unit 8, still needs to be finalized by the full commission. Other parts of the settlement would offset unpaid bills ?owed? by Mirant to the utilities it ?gouged? during the energy crisis, according to Attorney General Bill Lockyer. Mirant Americas Energy Marketing settled with the state Attorney General?s Office, the Department of Water Resources, the California Public Utilities Commission, Southern California Edison, and San Diego Gas & Electric. Those parties will stand in line with other Mirant unsecured creditors trying to get a piece of $175 million. DWR will get an unsecured claim against the company for $2.25 million, according to filings by the Securities and Exchange Commission. According to the SEC, the settlement specifically includes: The parties above, known as the ?California Parties? in the Federal Energy Regulatory Commission?s ongoing refund case, assuming Mirant?s debt for refunds for alleged price manipulation between October 2000 and June 2001. PG&E releasing Mirant?s Delta and Potrero plants from refund liability under their reliability-must-run contracts with the California Independent System Operator. PG&E receiving $63 million in unsecured claims. It will also receive either the partially completed 530 MW Contra Costa unit 8 or alternate considerations up to $85 million. According to PG&E, if the necessary transfer agreement is not completed, or if PG&E does not receive the necessary approvals, including CPUC authorization, Mirant will pay the utility at least $70 million in lieu of transferring the assets. Funds will be distributed as follows, according to the attorney general?s office: DWR gets an estimated $172.6 million, PG&E $170 million, Edison $101 million, and SDG&E $23.8 million. Attorneys? costs include $4.75 million, with $2.5 million going to the AG?s office. Under a second settlement directly with PG&E, the utility is set to get revenues from reliability-must-run contracts from Mirant?s plants. According to Ron Low, PG&E spokesperson, Mirant overcharged the utility approximately $270 million for the period June 1999 through December 2002. Settlements to Date Major fines and settlements with energy traders and sellers thus far include: January 13, 2005?$750 million with Mirant; includes liberating the company (which declared bankruptcy in July 2003) from any FERC penalties. The deal also distributes funds to the state?s utilities, DWR, and the Attorney General?s Office. December 7, 2004?FERC finalizes Duke?s $207 million settlement noted below. December 6, 2004?$12.5 million civil penalty on Mirant Energy Marketing from the Commodity Futures Trading Commission. The fine concerns reporting trades to industry journals. 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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PG&E Gains Power Plant in Mirant Settlement

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