Court: Calif. entitled to new hearing on energy refunds


By JENNIFER COLEMAN
Associated Press Writer


SACRAMENTO -- Federal energy regulators improperly calculated how much money energy companies should refund to California consumers, and the state should get another chance to argue for $2.8 billion in overcharges on electricity sales in 2000, an appeals court said Thursday.

In a long-fought victory for Attorney General Bill Lockyer, the 9th U.S. Circuit Court of Appeals said that the Federal Energy Regulatory Commission "abused its administrative discretion" when it declined to bill the power sellers for improperly reporting the wholesale rates they charged at the height of the state's 2000-01 energy crisis.

Lockyer said the court agreed with California's argument that "the watchdog was sleeping during the robbery, it failed to enforce its own rules, and it unduly restricted remedies for consumers with artificial chains."

The quarterly reporting requirements at issue are the government's main mechanism for regulating the power industry, but the safeguard "was, for all practical purposes, nonexistent while energy prices skyrocketed and rolling brownouts threatened California's businesses and citizens," the appeals court said.

The three-judge panel declined, however, to order further refunds on its own, but instead remanded the case to FERC for further proceedings.

California has asked FERC to order $9 billion in refunds; FERC has said that's more likely to be around $3 billion - the estimated amount overcharged on sales between Oct. 2, 2000, and June 20, 2001.

The commission had rejected California's bid to expand the refunds to include sales made between May and October 2000, a period in which energy companies failed to file the quarterly rate reports. FERC said the failure to file those reports amounted to "essentially a compliance issue." To remedy that, FERC said it could only order the refiling of those reports.

The appeals court disagreed, saying FERC had "broad remedial authority to address anticompetitive behavior" and had ordered refunds in other cases where wholesale energy companies failed to file the quarterly price reports.

FERC spokesman Bryan Lee said the commission welcomed "the court's clarification of the scope of the commission's remedial authority" for violations of the rate rules.

State Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said the idea that FERC believed it "lacked the ability to order a remedy has always seemed ridiculous to me."

"That's just an invitation to rip off customers and hope you don't get caught," said Bowen, D-Marina del Rey. "Cheaters figure out new ways to cheat the system and FERC has to have a way to go back and provide redress for illegal behavior."

The court decision was hailed as a victory by Gov. Arnold Schwarzenegger, who called the court's ruling "fantastic," and U.S. Sen. Dianne Feinstein, D-Calif. Both urged the commissioners to act quickly on California's refund request.

California has alleged that it was the victim of widespread manipulation of both the price and supply of energy in a newly deregulated electricity market. As prices soared, the state faced energy shortages and rolling blackouts. The crisis cost the state billions of dollars and disrupted energy markets across the West.

FERC capped wholesale power prices and instituted other changes in June 2001 that brought a quick end to the crisis. But by then, the state's largest utility had filed bankruptcy and two others had billions in debts. The state of California also rang up billions in debts after it stepped in to help the utilities buy power for their customers.

The agency ordered energy companies to refund $3.3 billion, but California wants the federal regulators to order more refunds from the companies, which include several subsidiaries of Enron Corp. and Mirant Corp. The companies have denied wrongdoing.

Mirant and Enron have declared bankruptcy, which complicates the collection of any refunds.

"How much of the that total we would be able to recover, we don't know. But I would expect that most of the companies are in good financial condition," said Ken Alex, the attorney leading the attorney general's energy task force.

The case is California v. FERC, 02-73093.

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