FERC delays decision on California power refunds
WASHINGTON (AP) – Federal energy regulators agreed with California on Wednesday that it was charged too much for electricity in the past year, but put off until the fall a decision on the amount.
The Federal Energy Regulatory Commission ordered an evidentiary hearing, to be completed within 60 days, to determine the size of the refund from providers of wholesale power.
”Market participants will not have to wait long for a final determination by the commission of California refunds,” said FERC Chairman Curtis Hebert.
But Hebert and fellow Commissioner Pat Wood acknowledged that whatever FERC decides some time this fall, the issue almost certainly will face legal challenges.
”I want you defending this thing in court, because it will go there,” Wood told FERC staff.
Separately, commissioners gave power providers and users in seven other Western states up to 45 days to make their case about alleged overcharges for electricity.
Commissioners accepted the recommendations of their chief administrative law judge, who failed earlier this month to broker a settlement between California and power wholesalers on allegations of overcharges.
Judge Curtis L. Wagner Jr. called for a trial-like hearing within 60 days to resolve the dispute. California claims generators overcharged by $8.9 billion; wholesalers offered to refund slightly more than $700 million.
After presiding over 15 days of closed-door talks at the commissioners’ request, Wagner said California failed to make its case for $8.9 billion, but ”that very large refunds are due is clear.” He said refunds could amount to ”hundreds of millions of dollars, probably more than $1 billion.”
California officials wanted FERC to reject Wagner’s recommendation for several reasons; for one thing, California wants overcharges dating back to May 2000, while Wagner suggested going back only to October.
The commission agreed with Wagner that it lacked authority under federal law to consider power sales before Oct. 2, 60 days after the initial complaint was filed about soaring power prices.
FERC ordered the talks in the hope that brief, but intense negotiations could produce a settlement, particularly with the threat of regulatory action hanging over the participants.
Michael Kahn, chairman of the California Independent System Operator that manages most of the state’s electricity grid and California’s lead negotiator in the talks, said commissioners had more than enough evidence to support ordering refunds immediately.
Sen. Barbara Boxer, D-Calif., criticized FERC’s action.
”The refunds provided under FERC’s order will fall far short of the $8.9 billion owed to the people of California as a result of price gouging,” Boxer said. ”This decision shows that there is a fundamental disconnect between FERC’s responsibility to protect consumers and the actions of its commissioners.”
Commissioners deferred a discussion of the independence of the ISO board of directors. Wagner referred to the board’s independence as a ”joke,” according to participants in the failed negotiations. And energy suppliers have complained that the board, appointed by Gov. Gray Davis, is too closely allied with the state Department of Water Resources, which buys power for the state.
Davis succeeded in replacing the old board of directors, which included energy industry representatives. Davis said they ignored consumer interests, and plans to fight if FERC tries to replace the current board.
”The governor says he will declare nuclear war if they take the ISO away from the state,” said Steve Maviglio, a Davis spokesman. Maviglio said federal authorities lack the legal power to ”take away a state-created authority.”
FERC imposed around-the-clock controls on wholesale power prices in June. Previously, prices were capped only during power emergencies. But a combination of mild weather, conservation and new power plants has given California a reprieve from power emergencies and rolling blackouts.
Electricity has been so plentiful in July that the state has resold 5 percent of the electricity it had purchased, at a loss of $14 million.
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