California wins ruling on 2000-2001 energy crisis

Published: Wednesday, Feb. 20, 2013 - 12:00 am | Page 6B
Last Modified: Wednesday, Feb. 20, 2013 - 8:03 am

More than a decade after the last rolling blackout, Californians could get $1.6 billion in electricity refunds because of market manipulation during the first few months of the energy crisis, officials said Monday.

A federal administrative law judge issued a preliminary decision last Friday in California's favor against several big energy wholesalers, including a U.S. government agency that sells hydropower from the Pacific Northwest and the government of British Columbia.

If the decision is upheld by the entire Federal Energy Regulatory Commission, or FERC, California ratepayers would receive $1 billion in refunds plus $600 million in interest, the state Public Utilities Commission said Monday.

The energy crisis bled billions from the big investor-owned utilities – Pacific Gas and Electric Co., Southern California Edison and San Diego Gas & Electric – and led to substantial rate hikes for customers. Refunds would be paid through offsets on consumers' monthly bills.

Californians have already received more than $3 billion in refunds for economic damage done during the energy crisis. Another claim is pending with FERC for $1 billion worth of alleged overcharges as the crisis peaked in early 2001.

The latest decision covers the first six months of the crisis, starting in May 2000, when prices first began to explode. The judge, Philip Baten, found that more than a dozen power wholesalers engaged in manipulative bidding practices to ratchet up pricing.

FERC originally refused to order refunds for activities in the early months of the crisis. The reason was that it wasn't until October 2000 that FERC put companies on notice that it might order refunds. California officials then got a court order forcing the federal agency to scrutinize power trades during the pre-October 2000 period.

"This case was an uphill battle for the CPUC and its allies. It took a lot of tenacity to achieve this victory before FERC, on behalf of California consumers," said PUC President Michael Peevey in a prepared statement.

The wholesalers cited in last Friday's decision include the Bonneville Power Administration, a federal entity that operates hydroelectric dams in the Pacific Northwest; and Powerex, a subsidiary of BC Hydro, the government-owned public utility of British Columbia.

A Bonneville spokesman, Michael Hansen, said the agency is "disappointed with the outcome" but is still studying the decision.

Also named were several commercial wholesalers, including a Shell Oil subsidiary.

According to the judge's decision, investigators found more than 20,000 improper trades that influenced pricing during the six-month period.

"This money was stolen from ratepayers in California by a bunch of sellers who conducted business like pirates," said PUC Commissioner Mike Florio in a prepared statement.

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