California's two largest investor-owned utilities joined the state Electricity Oversight Board effort seeking $500 million in refunds. The entities are suing 21 government-owned utilities they claim benefited from electricity overcharges during the state's power crisis of 2000-01. The Los Angeles Department of Water & Power was the single biggest seller of power among those named in the suit. The claims were filed March 16 in the U.S. District Court for the Eastern District of California in Sacramento. "We're not saying they did anything bad," said Erik Saltmarsh, Electricity Oversight Board executive director and general counsel. The entities "just got overpaid," he added. It was common for power producers - including public power agencies- to receive as much as six times their production costs for power sold from May 1, 2000, through June 20, 2001, according to Saltmarsh. That is the time period covered by the complaint. "We believe these overcharges should be returned to California consumers by both private and government settlements alike," added Gil Alexander, Edison spokesperson. Southern California Edison and Pacific Gas & Electric joined the electricity board in filing the suit after the public power agencies refused to pay refund requests made last December (Circuit, Dec. 9, 2005). "The lawsuit is based on breach of contract," said John Nelson, PG&E spokesperson. "We view it as very clear cut." Laura Lewis, Sacramento Municipal Utility District senior attorney disagreed. She insisted that the suit lacked merit and that SMUD and the others would prevail. The Ninth Circuit Court of Appeals already held that Federal Energy Regulatory Commission lacks the authority to order public power agencies to refund money, she said. "We sold this power at a time when our costs were extremely high," Lewis noted. "We were being good neighbors." FERC initially investigated the allegations raised in the current suit. It found that the agencies and numerous private sector generators received more for power than allowed under California Independent System Operator and Power Exchange tariffs. FERC subsequently ordered refunds beginning last year. Upon review, the U.S. Court of Appeals for the Ninth Circuit ruled September 6, 2005, that FERC did not have the jurisdiction to order the public power agencies to refund any overcharges (Circuit, Sept. 9, 2005). However, the court ruled that the state and investor-owned utilities could seek to recover excess charges directly from public power agencies. After the Ninth Circuit decision, the investor-owned utilities submitted refund claims to the public power agencies. The agencies did not pay them, which set the stage for last week's suit. In addition to SMUD, the defendants include the cities of Anaheim, Azusa, Banning, Burbank, Glendale, Pasadena, Riverside, Santa Clara, Seattle, Vernon, and Eugene. The Arizona Electric Power Cooperative, Modesto Irrigation District, Northern California Power Agency, Public Utility District Number 2 of Grant County, Salt River Project, and Turlock Irrigation District are also named defendants. They have 30 days to respond to the complaint. The Los Angeles Department of Water & Power is still reviewing the lawsuit, said Jonathan Diamond, an attorney for the city of Los Angeles. To date, Edison has recovered $700 million in refunds from overcharges. PG&E has collected about $1 billion from private generators. The Department of Water Resources could recover another $650 million from the public power agencies, said Lewis. He added that San Diego Gas & Electric might join the lawsuit to share in any collected refunds.
