FERC to tackle state power issues

FERC to tackle state power issues

Toby Eckert


Officials will look at the possibility of refunds, among other things, but the results may not be final.


WASHINGTON _ Federal regulators intend to address California’s demand for billions of dollars in refunds from power sellers and other key issues related to California’s power crisis at the end of the month.

At its meeting on March 26, the Federal Energy Regulatory Commission plans to take up the refund issue, the abrogation of long- term electricity contracts, allegations that El Paso Corp. manipulated natural gas supplies and a broader investigation of alleged manipulation of the Western power market.

Few observers expect any actions taken at the meeting to be the final word on the controversial cases, which may wind up in court. The commission, commonly known as FERC, could also refer some matters to a FERC administrative law judge for further consideration.

“We are 100 percent focused on getting the California . . . stuff out this month,” FERC Chairman Pat Wood told reporters after the commission met Wednesday.

In a related development, the Commodity Futures Trading Commission charged Enron Corp. and a former company trading supervisor, Hunter S. Shively, with manipulating natural gas prices.

The commission said Shively “caused Enron to purchase an extraordinarily large amount” of natural gas in the spot market from a key hub in Louisiana on July 19, 2001, through EnronOnline, the company’s Web-based trading platform. That artificially raised prices in the spot market and affected prices for natural gas futures traded on the New York Mercantile Exchange.

The charges were filed in U.S. district court in Houston.

Enron was also charged with operating EnronOnline “as an illegal futures exchange” from September through December 2001 for trading a type of commodity contract without authorization and with offering an illegal agricultural futures contract.

Sen. Dianne Feinstein, D-Calif., who has advocated stricter federal oversight of energy exchanges, called the charges “a case of too little, too late.”

Most of the California cases before FERC were initiated by utilities, including San Diego Gas & Electric, and state agencies stung by the huge increases in wholesale electricity and natural gas prices that rocked the state in 2000 and 2001, leading to power shortages and rolling blackouts.

The state is seeking $8.9 billion in refunds from power sellers and the cancellation or renegotiation of billions of dollars in long- term power contracts signed at the height of the crisis.

FERC launched the broader investigation of the Western power market in February 2002, after the collapse of Enron, once the nation’s leading energy trader. In a preliminary report issued in August 2002, FERC said there was some evidence of market manipulation by Enron and other companies and that indexes used to report natural gas prices were vulnerable to manipulation by the industry.

Power sellers have denied wrongdoing. They blame the crisis on factors including flaws in California’s deregulation of the power market, unusually high demand from consumers and a lack of new power plants in the state.

Also Wednesday, the Senate Energy and Natural Resources Committee approved Joseph Kelliher for a Republican vacancy on FERC, clearing the way for a full Senate vote on his nomination. Kelliher is a top policy adviser to Energy Secretary Spencer Abraham.

Democrats backed off on a threat to hold up Kelliher’s nomination when President Bush nominated Suedeen Kelly for a Democratic vacancy on FERC. Kelly is a New Mexico attorney and former regulatory counsel for the California Independent System Operator, which manages the state’s power grid.

The consumer group Public Citizen opposes both nominees, saying they both favor further deregulation of the wholesale electricity market and are too close to corporate interests.

Feinstein urged Senate Minority Leader Tom Daschle, D-S.D., to also support the reappointment of Democrat William Massey to FERC. Massey, whose term expires at the end of June, is viewed as an advocate of stronger market oversight.

Under Senate tradition, the minority leader and top Democrat on the Energy and Natural Resources Committee forward names to the White House for Democratic vacancies. FERC currently has three Republican seats and two Democratic seats.

Copyright Copley Press Inc. 2003

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