Ruling May Cut Energy Refunds

U.S. energy regulators can’t force government utilities to repay electricity overcharges from the 2000-01 energy crisis, a federal appeals court ruled Tuesday, a decision that could slice hundreds of millions of dollars from a refund sought for customers of California’s nongovernment power companies.

California state officials expressed displeasure with the ruling by the U.S. 9th Circuit Court of Appeals but didn’t say whether they would press the matter further.

“It’s a disappointing result,” said Tom Dresslar, a spokesman for Atty. Gen. Bill Lockyer. “In terms of where we go from here, we’re reviewing the opinion and weighing our options.”

Dresslar said the ruling might knock $1 billion off the attorney general’s demand for $9 billion overall in refunds from an array of power sellers. Traci Bone, an attorney with the California Public Utilities Commission, put the refund decrease in a range from $240 million to more than $1 billion, depending on future court decisions.

The Federal Energy Regulatory Commission has indicated that it may eventually order about $3 billion in refunds, but even that number was preliminary because of legal and administrative disputes.

“The commission still has the court’s opinion under review,” said Bryan Lee, a spokesman for the energy regulators in Washington. “But clearly the decision will limit the scope of refunds the commission will ultimately order in the California refund case.”

The court ruling applied to a handful of public entities that sold power to Californians during the energy crisis, including the Bonneville Power Administration in Portland, Ore., the Los Angeles Department of Water and Power, the federal Western Area Power Administration in Colorado and Utah, and several California cities, including Anaheim, Burbank, Glendale, Pasadena, Riverside, Sacramento and Santa Clara.

Under the ruling, they would escape liability for refunds from the Federal Energy Regulatory Commission, although California officials are determining whether they can mount further legal challenges.

The government utilities, which insisted that they acted properly during the energy crisis, argued that the federal regulators lacked the legal authority to demand that they return money to ratepayers.

The appeals court said Tuesday that its ruling turned on its reading of the Federal Power Act of 1935, a law sparked by financial abuses in the power sector, particularly by a web of entities controlled by industrialist Samuel Insull. The Depression-era law gave the Federal Energy Regulatory Commission authority over investor-owned utilities, but not over utilities owned by municipalities or the federal government, the three-judge panel ruled.

“In coming to this conclusion, we are not unmindful of the impact our decision may have on the overall refunds claimed by California ratepayers,” Judge M. Margaret McKeown wrote in the opinion. “But it is not our task to second-guess Congress’s judgment as to the breadth of FERC’s refund authority. Our role is a limited one -- interpreting the statute as Congress wrote it.”

In recent years, federal energy regulators have chafed under the restriction to their authority, and the recently passed energy bill gave them powers over the government utilities.

Meanwhile, the outcome of the refund case remains far from clear. Some technical issues are still being hammered out by federal regulators, and others are in the courts, including the time period that should qualify for refunds and whether emergency sales of electricity to the state at the height of the crisis should be considered for restitution.

Federal Energy Regulatory Commission Chairman Joseph T. Kelliher has urged that the matter be resolved, but no one is willing to predict when that will occur. How any refunds are allocated would depend on future decisions by state regulators.

“It’s important to note that the court did not find that the entities did not rip off California during the energy crisis,” Dresslar said. “What they found was that under federal law, they [power suppliers] were able to escape accountability for their actions.”