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Frontlines

Regulators face a daunting task in sorting out power refunds in the Pacific Northwest.
Fortnightly Magazine - October 1 2001

parties."

And therein lies a key problem: The FERC procedure invites all parties to disclose deals and assert all possible refund claims, even at the risk of alienating clients. Listen to Dan Watkiss, speaking at a hearing on Aug. 27 before FERC Administrative Law Judge Carmen Cintron:

"What that is, your Honor, is over the weekend ... it became apparent that for those of us in the Transmission Finality Group that are both buyers and sellers and because of that a lot of us would have ripple claims as purchasers, that the way we would ... introduce our offer of proof ... would take the form of affidavits by people in charge of accounting-here's our bill, who we did the deal with, who we made the purchases with.

"You go and ruin all of your commercial relationships [with] the people you don't want refunds against, but you tell them that you're going to seek refunds against them."

IN CALIFORNIA, FERC WAS DEALING WITH A KNOWN ENEMY. The consensus opinion against the PX allowed the commission to assert authority over municipal utilities (like Los Angeles) or irrigation districts (Modesto, Turlock, etc.) to force them to disclose their power dealings to help build a record on refunds, since everybody who traded power in California-jurisdictional or not-had to dance to the tune of the PX and the ISO in one way or another. The feds created this mess of a market, so they felt obliged to offer relief. The only way to do it was to include all the parties in the workout, including muni's and the like.

By contrast, there was no PX or ISO in Oregon or Washington state. Instead, in the Pacific Northwest, the FERC must deal with a market long accustomed to bilateral one-on-one bargaining. Also, the region is dominated by governmental entities, such as the Bonneville Power Administration (BPA). Hydropower rules the fuel mix, so natural gas costs and turbine heat rates have little relevance to any possible price cap. And hydropower changes the flow of the market; snowmelt and reservoir conditions tend to dictate deals. The water year is either "good" or "bad." That lengthens planning horizons. Utilities deal less in real time. Many bilateral contracts span a year or more. Forward contracting is the norm, not an impossible dream.

In short, the FERC isn't fixing a "broken" market in the Pacific NW. Any proof of price gouging must delve deep-to consider motive, intent and opportunity.

But that makes for a great show.

A Letter to Readers

With this issue, I step down as all-everything editor of , after a span of seven unbroken years and a string of more than 150 continuous magazine issues. I will hand over the reins to Richard Stavros, our new executive editor, who returns to our staff after a 12-month hiatus in the publishing and banking industries.

That means that Richard will take over the job of formulating and editing content for each issue, beginning Oct. 15. It also means that Richard, at the same time, will take over as author of this