Ruling May Expand Energy Crisis Penalties

A federal appeals court Wednesday ordered regulators to consider imposing penalties on power companies that manipulated the electricity market during the 2000-01 California energy crisis.

The U.S. 9th Circuit Court of Appeals said the Federal Energy Regulatory Commission’s 2003 handling of some of the fallout from the energy crisis was “arbitrary, capricious and an abuse of discretion.”

The state has sought reimbursement for an estimated $8 billion to $10 billion paid by consumers and businesses for overpriced power. FERC ordered energy companies, including several subsidiaries of Enron Corp., to pay about $3 billion for market manipulation.

Those repayments cover the period of Oct. 2, 2000 -- when power companies were put on notice that they could be forced to pay refunds -- to June 20, 2001. A three-judge panel of the court said FERC must entertain allegations and possibly demand refunds for market manipulation that occurred before Oct. 2, 2000.

California is seeking $2.8 billion in refunds before that date. But the state is unlikely to get that much because some power purchases by its agencies were not covered by the opinion.

“It appears the court took away more than it gave,” said Tom Dresslar, spokesman for Atty. Gen. Bill Lockyer.

The limited decision covers power purchased by the California Independent System Operator and the California Power Exchange, which is now defunct. For procedural reasons the decision did not cover emergency purchases by the state Department of Water Resources.

Lockyer’s office was analyzing how much the ruling would affect California.

The 80-page ruling covered about 200 petitions by power companies, public utilities and government agencies.

The state alleged that it was the victim of widespread manipulation of the price and supply of energy in a deregulated electricity market. As prices soared, California faced energy shortages and rolling blackouts. The crisis cost the state billions of dollars and disrupted energy markets across the West.

FERC capped wholesale power prices and instituted other changes in June 2001 that ended the crisis. But by then, the state’s largest utility, PG&E; Corp.’s Pacific Gas & Electric Co., had filed for Chapter 11 and utility owners Edison International and Sempra Energy had billions of dollars in debt.