Energy Firms Insist They Broke No Rules

In a barrage of legal briefs, energy companies have told federal regulators that they should not be penalized for chaos in the California energy markets during 2000 and 2001.

The Federal Energy Regulatory Commission put dozens of companies and municipal utilities on notice March 26 that they might be required to turn back profits from their operations in California during the energy crisis.

But in legal briefs filed in response and now being analyzed at FERC, many firms insist that they did not violate market rules and anti-gaming provisions.

In one joint filing, Dynegy Inc., Mirant Corp. and Williams Cos. insisted that FERC had no legal basis for requiring them to “disgorge” profits arising from trading strategies they had employed in California.

“We strongly believe that our actions were consistent with the then-applicable market rules,” Dynegy, Mirant and Williams declared in the filing, in an argument echoed by other energy companies.

“We fully support the notion that the commission should enforce rules of the road,” the three firms said. “This gives the markets discipline and promotes economic efficiency, thus benefiting buyers and sellers alike. But inventing new rules after the fact and imposing them retroactively is an entirely different matter.”

In a separate joint filing, a group including Arizona Public Service Co., Avista Energy Inc., Coral Power, El Paso Merchant Energy, Portland General Electric and Sempra Energy Trading Corp. argued that FERC’s staff was misinterpreting the law and was relying on vague legal provisions as the basis for punishing firms.

Enron Corp. and Powerex also have registered similar arguments with FERC, which plans to make rulings on the companies’ behavior in coming weeks.

Many of the firms contend that any penalties from FERC would violate their due process rights, because the companies were not clearly notified that such trading and bidding practices were forbidden and that such practices could draw specific penalties.

In their recent submissions to FERC, the companies typically made no admission of wrongdoing while maintaining that, in any case, FERC lacked the grounds to impose financial penalties.

FERC traditionally has not imposed such sanctions “unless there were specific ‘dos and don’ts’ and specific monetary sanctions set out in advance, which was not the case in California,” Dynegy, Mirant and Williams said.

A coalition including California government agencies and the state’s major investor-owned utilities has demanded $9 billion in refunds from a broad range of companies for their market activities during the energy crisis of 2000 and 2001.