FERC might order power suppliers to give refunds

Published on

$69 million in overcharges for January may be rebated

The San Diego Union-Tribune

Federal energy regulators, who resisted calls for refunds through eight months of California’s electricity crisis, said yesterday they might order suppliers to rebate $69 million in overcharges for the month of January.

The Federal Energy Regulatory Commission said it would order the refunds from 13 companies, unless they could justify their prices during the first month of the year.

Regulators said further they would consider refunds for the month of December.

But the commission order falls far short of the billions in overcharges that political and consumer leaders say have been gouged from the state by power suppliers since last June.

Last November, FERC found that California’s deregulated market was producing wholesale power prices that were “unjust and unreasonable,” a violation of federal law. But FERC did nothing to address the overcharges until yesterday.

“Today’s refund order demonstrates the commission’s commitment to ensure appropriate and reasonable prices in the wholesale electricity market given the supply and demand imbalance in California,” FERC chairman Curt Hebert said in a written statement.

The FERC proposal was nonetheless criticized by consumer advocates and a local political leader as an insufficient, token gesture.

“This is way too little and way too late,” said Rep. Bob Filner, D-San Diego, who continues to press federal legislation mandating electricity price rollbacks.

“FERC has done nothing for a year so they felt they had to do something. But the reality is that they are doing virtually nothing. I think California has been overcharged close to $20 billion. So this is not even a slap on the wrist.”

Filner also blasted the thresholds set by FERC for possible refunds. The commission said it was studying only power during Stage 3 power emergencies — when reserves fall to 1.5 percent or less of demand.

FERC also said it would subject only sales of $273 per megawatt or higher to potential refund, a level seven times higher than that paid for power prior to the crisis.

“Even if FERC goes ahead and orders these refunds, it will still allow the thieves to get away with most of the loot they stole from us,” said Harvey Rosenfield, president of the Foundation for Taxpayer & Consumer Rights in Santa Monica.

“The ideologues in the Bush administration are trying to protect the power industry by low-balling the penalty,” he said.

The FERC proposal for refunds prompted a written dissent from a member of the commission itself. William Massey said all sales over $150 per megawatt hour or 15 cents per kilowatt hour should be subject to refund.

State officials and others repeatedly appealed to FERC to enforce federal consumer protections as California’s deregulated power market drove electricity prices to unprecedented levels, despite the promise by advocates that it would lower prices.

A series of startling quarterly surges in profits for energy companies and power shortages have further fueled complaints that the deregulated market is being manipulated at consumer expense.

In response to the soaring prices, Gov. Gray Davis and the Legislature are crafting a package expected to include some $20 billion in borrowing to stabilize the power market and assist the state’s major utilities, which claim billions in losses from buying power for their customers.

Also yesterday, the state Department of Finance said it expects to have spent $3.2 billion buying power by March 19. The department gave notice that it will begin spending another $500 million increment after that date.

The California Independent System Operator, which released a preliminary report Feb. 28 identifying at least $315 million in potential overcharges during January, welcomed the FERC movement on refunds.

“We are pleased that FERC has recognized its responsibility and expressed a willingness to order refunds,” said Charles Robinson, general counsel for the ISO.

But Robinson said the ISO would study the federal decision — which was released near the close of business yesterday — and consider whether to file a petition for rehearing on the matter during the next 30 days.

The ISO also said it would review what to do about $170 million in overcharges that it identified during January but which FERC said arose from sales by municipal power authorities, which fall outside federal jurisdiction.

The ISO report last month also found at least $240 million in potential overcharges by suppliers during December.

A spokesman for Sempra Energy, which faces potential refund of nearly $500,000 for January, noted that the company filed the complaint to FERC that led to the refund order. The spokesman for Sempra, parent company of San Diego Gas & Electric, said it continues to support refunds from suppliers, as well as federally imposed regional price caps on power sales.

A spokesman for the Western Power Trading Forum, an industry group, said the potential refunds were manageable.

“My members feel they can cost justify their bids,” said Gary Ackerman, executive direct of of the group. “Some of the older power plants have factors that FERC did not consider in their pricing models.”

Under yesterday’s order, those on the hook for the largest potential refunds are Dynegy, Duke Energy and Reliant Energy.

Dynegy, which faces a potential refund of more than $22 million for the month, could not be reached for comment.

A spokesman for Duke Energy, which FERC is targeting for nearly $18 million in January refunds, said the company would provide cost justification for its charges.

Tom Williams, the Duke spokesman, said in in addition to conventional costs of power production, the company tacked on charges for “credit risks” during January. He he noted that Duke remains unpaid for recent power sales to Pacific Gas and Electric and Southern California Edison.

The California Power Exchange, meanwhile, the state’s electricity trading center and a cornerstone of its attempt at deregulation, filed for Chapter 11 bankruptcy protection, citing $100 million in debts.

The exchange’s business evaporated after wholesalers denied PG&E and Southern California Edison credit in January and the state began buying power for the utilities’ customers.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases