Bloomberg News

Enron-Era Ruling Signals $1.6 Billion California Refunds

February 20, 2013

Enron-Era Ruling Opens Door to $1.6 Billion Refund in California

Dave Barrett, supervisor of hydro generation, walks past a 13 megawatt generator at PG&E Corp.'s Drum Power House in Alta, California. Photographer: Ken James/Bloomberg

California energy regulators said that a preliminary ruling by a U.S. agency may bring as much as $1.6 billion in refunds for consumers harmed during the state’s electricity crisis more than a decade ago.

An administrative law judge at the U.S. Federal Energy Regulatory Commission on Feb. 15 determined that companies including Powerex Corp. and a unit of Royal Dutch Shell Plc (RDSA) violated market rules in 2000, when California’s electricity prices reached their peak.

The ruling in the case brought by the state’s Public Utilities Commission and two electricity providers follows more than a decade of legal wrangling after trading by Enron Corp. workers led to price increases and blackouts in California affecting millions of customers in 2000 and 2001.

“It took a lot of tenacity to achieve this victory before FERC, on behalf of California consumers,” Michael Peevey, president of the state’s Public Utilities Commission, said yesterday in a statement.

Congress in 2005 gave FERC additional powers to police energy markets, in response to Enron’s collapse, and the agency has announced since January 2011 at least 13 separate investigations of market manipulation, including probes of energy-trading units at Barclays Plc (BARC) and JPMorgan Chase & Co. (JPM:US)

Last week’s ruling by FERC Judge Philip Baten stems from a case that was remanded to the agency by a federal court. In his decision, Baten sided with California and units of PG&E Corp. (PCG:US) and Edison International (EIX:US), which joined in the complaint.

Case Respondents

If the five-member FERC adopts the judge’s decision, California consumers may eventually be paid almost $1 billion in refunds and an additional $600 million in interest, according to the statement from the state energy regulator. It didn’t say which companies would be responsible for payment.

Respondents in the case include Powerex, a unit of British Columbia Hydro & Power Authority in Canada; Shell Energy North America US LP of Houston; and Calgary-based TransAlta Corp. (TA) The Western Area Power Administration, which provides power in 15 central and western states, and the Bonneville Power Administration, which serves eight West Coast and Rocky Mountain states -- both units of the U.S. Energy Department -- were also named among entities accused of violating market rules.

“We are still digesting the initial decision but are disappointed with the outcome,” Michael Hansen, a spokesman for Portland, Oregon-based Bonneville, said in an e-mail.

Shell Response

Shell plans to file “exceptions” to the judge’s recommendation, Kimberly Windon, a company spokeswoman in Houston, said by e-mail. The company doesn’t believe Coral Power, Shell Energy North America’s predecessor, violated market rules at the time, she said.

The company’s exceptions “will demonstrate that evidence does not support the findings made by the Administrative Law Judge, and in fact, shows that Coral Power’s actions were consistent with relevant regulations and tariffs,” she said.

Lisa Meiman, spokeswoman for the Lakewood, Colorado-based Western Power administration, declined to comment. “The matter is still in litigation,” she said by telephone.

FERC spokesman Craig Cano said the agency didn’t have a comment on the judge’s ruling because it was an initial decision. The parties involved have 30 days to seek requests for a rehearing and the five-member commission can review the decision.

Should FERC uphold the judge’s recommendation, refunds to ratepayers would be set in a separate phase of the case, according to Windon.

Spokesmen for Vancouver-based Powerex and TransAlta didn’t respond to requests for comment.

To contact the reporter on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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Companies Mentioned

  • JPM
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  • PCG
    (PG&E Corp)
    • $45.37 USD
    • -0.02
    • -0.05%
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