California Attorney General to Challenge Federal Agency over Utility Refunds

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The San Diego Union-Tribune

Opening a new front against electricity suppliers, California’s attorney general will today challenge the refusal by federal regulators to consider refunds for overcharges paid by SDG&E customers during the summer of 2000.

Attorney General Bill Lockyer will file a request with the Federal Energy Regulatory Commission for $ 12 billion in refunds that would cover overcharges paid by utility customers during that summer and before, according to a source familiar with the filing.

Despite that summer’s wild power rates, FERC has said it is unable to consider refunds because of federal law. The federal commission says it is required to notify suppliers that sales might be subject to refunds before the sales take place, not afterward.

In responding to the California crisis, FERC served notice on suppliers that refunds might be ordered after Oct. 2, 2000.

The commission is considering some $ 30 billion in state refunds for the period following that date, including $ 9 billion covering electricity purchases during 2000 and 2001 and more than $ 20 billion in alleged overcharges included in long-term power contracts signed during the crisis.

FERC is charged with ensuring that wholesale electricity rates meet a federal standard of being just and reasonable. Suppliers have denied wrongdoing and say prices soared because of shortages.

Lockyer will argue that the refund period should begin earlier because electricity suppliers violated federal law and thus are required to return ill-gotten gains, the sources said.

Consumer advocates, who say suppliers manipulated the market during the crisis, applauded the attorney general’s push for additional refunds. Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica, said that SDG&E customers should have a particular interest in the initiative.

“This is billions of San Diego’s dollars locked up according to an interpretation of federal law,” said Heller, whose foundation has estimated that market manipulation and other aspects of deregulation could eventually cost state residents $ 71 billion. “SDG&E‘s customers should have the first call on whatever money Lockyer can recover because they were the first ones to get gouged.”

In rebuffing requests for refunds before October 2000, FERC cited the Federal Power Act, which it says bars refunds without first notifying suppliers that their rates could be subject to reductions.

FERC says this was to avoid creating uncertainty in wholesale power markets.

But consumer advocates say the federal policy on refunds related to an earlier period when suppliers’ rates were regulated. In deregulated markets, FERC allows suppliers to charge whatever the market will bear and thus has no prior knowledge of whether prices will meet the federal standard of being just and reasonable.

In the deregulated markets, therefore, FERC must rely on retrospective rate adjustments to insure compliance with federal law, consumer advocates say.

“There is no doubt gouging was taking place and refunds are due,” said Heller. “The question is whether Lockyer has the legal key to get to those refunds.”

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