California Loses in Effort for More Power-Crisis Refunds

New York Times ^ | 5/30/02 | RICHARD A. OPPEL Jr.

[kattracks]

ASHINGTON, May 30 — Federal energy regulators examining whether companies overcharged California for electricity during the state's power crisis rejected an attempt by California officials today to expand their claim for refunds by as much as $2.8 billion.

Officials at the Federal Energy Regulatory Commission are already reviewing California's demand that it be refunded $8.9 billion from energy companies that the state says overcharged it beginning in October 2000. Energy companies deny any illegal overcharging, and an administrative law judge at the commission has not ruled on the matter.

Two months ago, the California attorney general, Bill Lockyer, sought to expand the time frame to include suspected overcharging before October 2000. Mr. Lockyer asserted that many power-sale transactions before that date should be subject to refunds because power companies failed to file appropriate paperwork with the commission listing specific dates, prices and other data about their sales.

The commission rejected that argument today, calling it a "collateral attack" on past rulings. In response, Mr. Lockyer said he would ask the agency to reconsider its decision.

In its order, the commission did conclude that some major energy companies had failed to properly disclose power-sale transactions. It said the Williams Companies, Dynegy, Mirant and Reliant Energy had filed data that "did not comply with the commission's reporting requirements." The commission ordered power companies to file new reports with more complete information.

In a statement this afternoon, Mr. Lockyer said that the commission's decision "recognizes our argument that power companies failed to file detailed price reports as required by law and that these are serious violations."

"Unfortunately," he added, "FERC has refused to order refunds for California for what FERC itself calls serious violations."

Mr. Lockyer also announced today that he had filed lawsuits in state court asserting that eight more companies had charged illegal rates during the power crisis. The complaints, filed in the Superior Court of California in San Francisco, name BP Energy, Idaho Power, Merrill Lynch Capital Services, Portland General Electric, Puget Sound Energy, TransAlta, TransCanada and Tucson Electric. Similar complaints were filed last month against Reliant, Mirant, Williams, Coral Power and Powerex.

Today, power companies applauded the commission's ruling.

"It's been very clear from the beginning which transactions are subject to refunds and which are not," said Gary Ackerman, the executive director of the Western Power Trading Forum, a trade group, "and this will give markets reassurance in this politically charged atmosphere that the federal government is not going to just cave in" to political demands for refunds.

Mr. Ackerman described the lawsuits by Mr. Lockyer as "frivolous" and politically motivated, saying that the attorney general had failed to produce "anything to back up" the accusations he has made.

El Paso to Alter Gas Flows

WASHINGTON, May 30 (AP) — Federal regulators directed the El Paso Corporation today to change the way it divides pipeline space to ensure that more natural gas flows into California, where demand for the fuel is growing.

The Federal Energy Regulatory Commission ordered the company, one of the Southwest's largest transporters of natural gas, to renegotiate shipping contracts to remove preferences to shippers of gas into Arizona and New Mexico.

[Asclepius]

Mr. Ackerman described the lawsuits by Mr. Lockyer as "frivolous" and politically motivated, saying that the attorney general had failed to produce "anything to back up" the accusations he has made.

But the children? What about California's children? Can those greedy corporate executives produce "anything to back up" their ravenous appetites for the blood of California's working families?

[Ernest_at_the_Beach]

Man, it has all happened today for Grayout Davis!

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[snopercod]

I am curious on what basis FERC is ordering the "renegotiation" of the gas pipeline allocation contracts. Because California "needs" it?

[Dog Gone]

I am curious on what basis FERC is ordering the "renegotiation" of the gas pipeline allocation contracts. Because California "needs" it?

Basically, yes.

Long ago, El Paso entered into contracts with customers outside of California to deliver as much as gas they ever needed on the pipeline, and whatever was left over was available for California. That wasn't a problem, because California wasn't using that much.

Now, California demand has soared and it was getting disproportionately hurt. Because FERC retains regulatory authority over these interstate pipelines, it found that this was "unjust and unreasonable", which is the finding necessary to order changes.

El Paso doesn't care. It probably welcomes the chance to renegotiate contracts in a tight market. If anything, they'll make more profit. It's California's neighbors who are getting screwed, but that's what happens when we give the government the power to interfere with the market.

In a free market, of course, market forces would have already reacted to build a new pipeline into California to serve demand, but regulatory roadblocks have slowed that. El Paso still would like to build more capacity, and will if the politicians and bureaucrats get out of the way.

[snopercod]

Thanks for the elaboration.

I had always understood that the U.S. Constitution gave congress the power to "regulate Commerce ...among the several States" in order to prevent one state from dealing unfairly with another - punitive tariffs at the border and that sort of thing.

Furthermore, Article I, Section 8 requires that "...all Duties, Imposts and Excises shall be uniform throughout the United States;" to prevent the federal govenment itself from favoring one state over another.

Now it seems that we have the feds doing exactly that: Favoring California over New Mexico and Arizona, and "impairing the Obligation of Contracts" to boot.

You probably know better than I whether El Paso will object to this or not, but it seems that they have several constitutional grounds for fighting this if they choose.

[jocko12]

GOV.DOOFUS WHERE ARE YOU!!!!

[lewislynn]

In a free market, of course, market forces would have already reacted to build a new pipeline into California to serve demand, but regulatory roadblocks have slowed that. El Paso still would like to build more capacity, and will if the politicians and bureaucrats get out of the way.

Natural gas has been deregulated for years. Are you suggesting it's just as phony as all the other "deregulation" scams?

[Dog Gone]

You probably know better than I whether El Paso will object to this or not, but it seems that they have several constitutional grounds for fighting this if they choose.

El Paso already issued a statement saying that they support the decision, which is why I speculated that they would like to renegotiate these contracts in today's environment.

It's the utilities in New Mexico and Arizona who have the beef. Their good-faith contracts just got ripped up by the Feds.

The constitutional objections you mentioned have been raised in previous cases and rejected. The Court has held that this is a valid exercise of the authority granted by the Commerce Clause, and that FERC can do this.

We are starting to see some chipping away by the Court on that broad power, but it's only at the edges so far. Someday, if Bush is permitted to restock the Supreme Court with strict constructionists, I think this power will be taken away entirely. Then, perhaps, FERC will follow the Civil Aeronautics Board into the trashbin of history, and the free market, contract, and property rights will be restored to their rightful positions.

[Dog Gone]

Natural gas has been deregulated for years. Are you suggesting it's just as phony as all the other "deregulation" scams?

Natural gas prices have been deregulated for years, not interstate transportation of it. It's only "phony" if you don't understand the facts.

[Robert357]

Yes, not a good day. The wester trading group comment about the "frivolous," and politically motivated lawsuit is harsh but correct. It will be interesting to see how the dust settles when FERC finally decides things, although they don't seem to be as vendictive as I would expect.

[Carry_Okie]

Mr. Ackerman described the lawsuits by Mr. Lockyer as "frivolous" and politically motivated, saying that the attorney general had failed to produce "anything to back up" the accusations he has made.

Apparently Mr. Ackerman is describing this bogus grandstanding lawsuit as if it is uncharacteristic of the California AG. It seems that he is unfamiliar with Mr. Lockyer, who is incapable of any other kind of legal action.

[Robert357]

If California isn't careful, it will be headed for the perfect "cash-flow" strom that could cripple the state for decades.

The elements of the strom that seem to be lining up include: (1) an election year where hard choices will be avoided if at all possible; (2) a clear budget deficit that is getting worse by the hour; (3) a recent court decision that says the state should pay federal minimum wages if it doesn't get a budget passed to state public employees; (4) a Governor proposed budget that is based on borrowing and expectations for large amounts of help from the federal government; (5) various democratic party leaders within the state government refusing to honor contracts and threatening all kinds of litigation, the result of which is making business unsure if California can be a good business partner; (6) an out-of-control Governor who appears to be shaking down anybody and everybody from teacher groups, to students, to folks contracting with the state for election campaign money; (7) Bond rating agencies that after the Merril-Lynch decision are concerned that their public pronouncements on credit-worthyness had better match their internal e-mails; (8) a financial plan to pay off borrowing that has not seen the light of day and is probably false to begin with.

Yes, this may be the perfect financial cash-flow storm building in California.

[Ernest_at_the_Beach]

Now that is a super summary!

[Ernest_at_the_Beach]

See post #14!

[Liz]

EATB, thanks for the ping to Robert's stunning analysis. You guys sure made my day.

EXCELLENT INSIGHTS RE: 5) various democratic party leaders within the state government refusing to honor contracts and threatening all kinds of litigation, the result of which is making business unsure if California can be a good business partner;

This I gotta see.

AND (6) an out-of-control Governor who appears to be shaking down anybody and everybody from teacher groups, to students, to folks contracting with the state for election campaign money;

Amen.

[NormsRevenge]

Mon$oon Sea$on Hits Ol' GraYout ... I LUV IT !!
DUMP DAVI$



GO SIMON

[Dog]

See post 14!

[lewislynn]

Natural gas prices have been deregulated for years, not interstate transportation of it.

Yea, that's what I thought, it's another phony deregulation.