Coalition Challenges Energy Settlements

California officials Tuesday urged federal regulators to throw out pending settlements with 27 power suppliers for alleged misconduct in the state’s energy marketplace.

In filings with the Federal Energy Regulatory Commission, the California attorney general and other parties said the settlements shortchanged ratepayers stung by inflated power costs during the energy crisis.

The deals “are completely inappropriate,” said Vickie Whitney, a deputy state attorney general. She said the firms would be forced to pay back “only a minuscule percentage of what sellers should owe.”

The settlements announced so far add up to less than $3 million.

California officials also are concerned that regulators are employing a “piecemealing strategy” of settling cases against the companies individually. This approach, they say, doesn’t assign any liability or penalty for the costly, market-wide distortions that resulted from illegal trading tactics.

On June 25, the federal commission issued show-cause orders to more than 60 power suppliers, a first step in forcing them to surrender profits made through alleged market manipulation.

Since then, the agency’s staff has reached preliminary agreements to dismiss or settle charges against about 30 energy companies and municipal utilities. Some of the deals are not being challenged by the state, Whitney said.

Federal regulators have not determined how settlement payments would be distributed. The cases are being reviewed by a FERC administrative law judge and ultimately must be endorsed by the commissioners who run the regulatory body.

“They’re not done deals,” said Bryan Lee, a FERC spokesman, noting that he could not comment on ongoing administrative proceedings. “They’re proposed settlements that will be vetted before the administrative law judge and vetted before the commission.”

If deals are not reached, the companies and utilities accused of wrongdoing would face trial-like hearings before an administrative law judge.

The California coalition challenging the settlements includes government agencies and the state’s two largest electric utilities, Southern California Edison and Pacific Gas & Electric, both of which say they were forced to buy power at artificially inflated prices during the energy crisis.

The state coalition has accused the Los Angeles Department of Water and Power, for example, of profiting through the “ricochet” strategy of exporting power out of state, repurchasing it and selling it again here, avoiding price caps.

“By dismissing LADWP at this stage, the commission will cut off inquiry into all of these gaming strategies and stop potentially millions of dollars from making their way back into the hands of California consumers,” Whitney said.

DWP officials said Tuesday that they had not seen the filing and declined to comment. In the past, they have defended the utility’s conduct.

Whitney also expressed qualms about the pending $836,000 settlement with Reliant Resources Inc., saying that it undercounts Reliant’s improper profit.

Houston-based Reliant had no comment.

Another energy dealer, Mirant Corp., disclosed Tuesday that it had reached a preliminary settlement with FERC staff in which it would pay $332,411.

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Times staff writer Nancy Rivera Brooks in Los Angeles contributed to this report.