PUC Urges U.S. to Take Harder Look at Electricity Price Spike

State regulators challenged the Federal Energy Regulatory Commission on Tuesday to look harder for evidence of illegal behavior by power sellers so that FERC can order refunds of some of the record electricity prices Californians paid last summer.

The California Public Utilities Commission, meeting in San Francisco, also endorsed price caps as a temporary solution to out-of-control prices because the California market is distorted by price manipulation, which led to more than $4 billion in overcharges in recent months.

The five-member PUC was officially responding to FERC’s Nov. 1 recommendation of substantial but largely technical changes to the way electricity is bought and sold in California.

FERC’s order, which said some PUC policies exacerbated the state’s electricity crisis, disappointed many in the state because it did not order refunds even though the federal agency found that prices were “unjust and unreasonable” at times during the summer. FERC cannot order refunds without a finding of illegal behavior.

The PUC unanimously adopted a staff report that says FERC erred in attributing high wholesale electricity prices to tight electricity supplies and to flaws in the state’s market structure rather than illegal manipulation of prices by electricity generators and market middlemen. FERC should investigate further before it “imposes far-reaching remedies on the California marketplace,” the report said.

Commission President Loretta Lynch said California electricity users deserve a more thorough FERC investigation of market manipulation “before they are subjected to yet another dangerous theoretical market experiment.”

“This unanimous vote demonstrates the bipartisan and united conclusion reached by California’s policymakers that real price and bid caps are necessary to protect consumers until California can fix its energy market, which the FERC recognizes has produced unjust and unreasonable prices,” said Lynch, a Democrat.

But the PUC’s three Republican members, in a separate statement that will be filed today along with the staff report as the commission’s formal reply, expressed doubt about the PUC’s ability to change some of the policies criticized by FERC. That included the practice of denying utilities full freedom to buy electricity outside of the California Power Exchange, the state’s primary electricity market.

“It is our conclusion that California laws and regulations may prove so restrictive and so incapable of change that state action will destabilize the federally regulated wholesale market,” said the statement signed by Henry M. Duque, Josiah Neeper and Richard A. Bilas.

Carl W. Wood, the second Democrat on the Commission, said he found such comments “inappropriate.”

“It essentially is a request for oversight and intervention in a matter that is rightfully under the jurisdiction of state agencies,” Wood said.

Wood, and the PUC staff report, also disputed a contention by FERC that severe power shortages were behind high wholesale prices. Wood cited a report issued Monday by the California Energy Commission predicting that the state will have more than enough electricity to meet its needs next summer if the weather is normal.