Liam Baker, vice president for regulatory affairs at US Power Generating, questions whether his company’s power plants and control systems in New York and Massachusetts must comply with the...
The commission nails companies, but orders payments.
The Federal Energy Regulatory Commission (FERC) finally dealt with the many issues that arose out of the 2000/2001 California energy crisis. On June 25, FERC issued a slew of orders that settled some old disputes, gave a glimpse of the future, and offered insight into the commissioners' thinking.
California Gov. Gray Davis called the decisions by FERC "reprehensible." He equated punishing Enron to "beating a dead horse." Finally, Davis said it is "clear that ratepayers will have to look to the courts for relief, since none is coming from FERC." What made Davis so angry? A recap is in order.
Deathblow to Enron Trading. In what it called its first "death-penalty case," FERC unanimously revoked market-based rate authority and terminated blanket-marketing certificates for Enron Power Marketing Inc. and Enron Energy Services, collectively known as Enron Power Marketers. But in order to cause no more harm in the bankruptcy proceeding, FERC said it would allow Enron to "unwind" its present electric and natural gas positions and then notify FERC of its last trading date.
Commissioner Nora Mead Brownell: "This case more than any other makes it clear when you have as part of your business plan systemic market manipulation, you will not have market-based rate authority."
Commissioner William Massey: "Profit maximization is not a reason for market manipulation. We shout that loudly and clearly."
Commissioner Pat Wood III: "By revoking the company's authority to sell electricity at market-based rates, and similarly to sell natural gas under a blanket certificate, we send a clear signal that competitive markets must work in the interest of customers and the public interest."
Bull's-eye Now on 60 Firms. FERC ordered 60 companies to show cause why they should not be forced to repay illegal profits from allegedly "gaming" the wholesale power market via short-term contracts during the California energy crisis from Jan. 1, 2000, to June 20, 2001. It said the companies appear to have engaged in behavior that violated the tariffs of the California ISO (Cal-ISO) and the now defunct California Power Exchange (PX).
Commissioner William Massey dissented on two points. He would not limit the penalties for gaming to merely disgorgement of unjust profits. Because manipulation can raise market-clearing prices to all players, he believes manipulative sellers should be forced to make the market whole. Also, he would not apply remedies to nonpublic utilities because he does not believe FERC has such authority over them.
Brownell: "This was probably one of the most challenging orders to conclude. We need to complete closure and develop rules to prevent this from happening in the future."
Massey: "Disgorgement of profits may not be a deterrent."
Wood: "The remedy to make the market whole was used in a 2001 Reliant Energy case, and I believe that remedy is still available. I hope Congress gives us more robust power in such matters."
Still More Targets. FERC also instructed some 24 other partnership companies to justify power trading profits or else face disgorging them. It explained that a recent report issued by the commission staff