Avista, 3 Others May Lose Market-Rate Pricing Rights, FERC Says

Bloomberg News ^ | 06/04 17:49 | Liz Skinner

[Robert357]

Washington, June 4 (Bloomberg) -- El Paso Electric Co., Avista Corp., Williams Energy Marketing & Trading Co. and Enron Corp.'s Portland General Electric Co. may lose rights to charge market-based rates for electricity and natural gas because they haven't cooperated fully with an investigation into market manipulation, the Federal Energy Regulatory Commission said.

[Robert357]

FERC is flexing its muscles to scare folks. This is going to get interesting to watch. The rule use to be that when FERC said jump, you jumped and asked on the way up both how high and how long and them prayed you could comply. It has been a long time since FERC really clubbed someone. Kind of interesting since the Enron bankruptcy is counting on PGE to be the key asset to provide value.

[Robert357]

I saw this on Cal rough and tumble. Looks like FERC make an end of the day announcement to show it was flexing its muscle. We shall see if they follow through with the threat.

[snopercod]

Just a reminder that FERC only has authority to set inter-state rates. If any of these companies choose to sell their product only within their state, FERC has nothing to say about it.

So far...

[Ernest_at_the_Beach]

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[monkeyshine]

Couldn't they then sell their power to another agency in state, who would then resell it out of state?

[lewislynn]

Couldn't they then sell their power to another agency in state, who would then resell it out of state?

FERC Threatens 4 Power Suppliers.

Portland General told regulators it engaged in a practice known as "ricochet" or "megawatt laundering."

In this technique, a power company buys electricity in California at a capped price and sells it to an out-of-state buyer.

The power supplier then repurchases this electricity for a slightly higher price and zips it back into California, where it can sell the power for the higher price allowed for imported electricity.

Portland General identified 17 such ricochet transactions between April and June 2000.

In these deals, Enron purchased the electricity in California and then sold it to Spokane, Wash.-based Avista, Portland General officials said.

Avista then sold the electricity to Portland General, which then sold it back to Avista, which then resold it to Enron, which then sent the power back into California, usually to the Los Angeles area.

[Dog Gone]

These companies are required to cooperate with FERC, and if they refuse to do so, FERC can hammer them into compliance. That is what is happening here.

This all seems to center around the practice of megawatt laundering, which was a way of getting around California's ridiculous price controls. It's fairly apparent that each of these companies did it on at least one occasion, and some did it on several occasions. They are under an obligation to disclose to FERC exactly what they did, because it involves interstate trading of electricity.

What's not at all clear is whether the technique was illegal. From what I can tell, it wasn't. But that's a different question of whether they must now disclose it.