State's Energy Firm Claims Denied

Times Staff Writer

A federal judge Tuesday dismissed most of California's claims against 11 energy companies, setting back the state's campaign to recoup billions of dollars from electricity sellers that profited during the power crisis.

The ruling leaves California more dependent than ever on a decision expected today from the Federal Energy Regulatory Commission on the state's petition for $9 billion in refunds from energy companies.

U.S. District Judge Vaughn R. Walker, in San Francisco, rejected most of Atty. Gen. Bill Lockyer's claims that the 11 companies violated California's antitrust and unfair business practices laws and failed to submit proper reports to federal regulators. The judge agreed with the power companies that they are immune from being forced to pay California penalties because Congress, when it passed the Federal Power Act in 1920, put the job of regulating wholesale electricity wholly in the hands of federal regulators.

"By these claims, the [attorney general] seeks to use state law to regulate a field that Congress has set aside exclusively for federal control," Walker wrote.

Lockyer said he will ask the U.S. 9th Circuit Court of Appeals to reverse the ruling. He seeks an unknown but substantial amount of money from the companies in damages, the return of profits and a $2,500 penalty on each of the thousands of transactions the companies made during the collapse of California's power market in 2000 and 2001.

Walker left intact Lockyer's claim under federal anti-monopoly law that two companies -- Reliant Energy of Houston and Mirant Corp. of Atlanta -- should be forced to sell some of the power plants they own in California. A court conference on that issue is scheduled for early next month.

"We're gratified that the court recognized the state had valid antitrust claims," said Lockyer spokesman Tom Dresslar. "We will appeal the unfavorable portions to the 9th Circuit and we're confident we will prevail.

"It's important to stress that nothing in this ruling disputes the factual claims we made," he said. "All it says is we can only pursue those claims with FERC. We strongly disagree."

Besides the antitrust charges against Mirant and Reliant, Lockyer accused those companies and Dynegy Inc. of double-selling megawatts in violation of the state's unfair business practices code. He also accused Reliant, Mirant, Coral Power, Puget Sound Energy, Transalta Energy Marketing, Tucson Electric Power Co., Idaho Power Co., Merrill Lynch Capital Services, Portland General Electric Co. and BP Energy Co. of failing to properly file their electricity prices and sales with FERC.

Energy company officials welcomed the judge's affirmation of federal jurisdiction.

Mirant spokesman Patrick Dorinson said, "Today's decision by the federal court reinforces what Mirant has said all along: that the California attorney general's suits should be dismissed and did nothing to solve the energy problems. They were merely a distraction from the real causes of the crisis."

Reliant spokesman Richard Wheatley called the ruling "very significant" for both his company and federal control of power markets.

"The issues are properly in the hands of the FERC right now," he said.

The federal regulators are scheduled to release a long-awaited decision today on whether the private companies and publicly owned utilities that sold electricity at extraordinary prices during California's power crisis should be forced to give money back to customers of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.

California cast aside 100 years of regulating electric utilities in 1998 when it opened a partially deregulated electricity market. The market malfunctioned badly, leading to soaring prices.

A rate freeze protected most utility customers from directly paying the market prices in 2001 and 2002, but those customers now face 20 years of paying back $11.3 billion in loans to cover the state's cost of buying electricity during the crisis.

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