Federal appeals court upholds $200-million penalty for California energy crisis

Transmission lines carry wind power across the Midwest.
A federal appeals court upheld a $200-million penalty against large energy companies that have yet to reach a settlement for their role in California’s energy crisis.
(Associated Press)

A federal appeals court upheld a $200-million penalty against large energy companies that didn’t settle allegations about their role in California’s energy crisis.

In a 34-page opinion released Thursday by the U.S. 9th Circuit Court of Appeals, a three-judge panel affirmed a ruling by the Federal Energy Regulatory Commission that large energy companies manipulated California’s power market during the state’s 2000-01 energy crisis.

Counting the latest penalty, the state has recovered almost $7.7 billion from energy businesses and agencies for energy-crisis actions, according to the state attorney general’s office.

“I am gratified that the court upheld FERC’s determination that large energy companies, such as Shell, manipulated California’s energy markets during the 2000-2001 energy crisis, leading to blackouts and exorbitant prices for the customers of California’s investor-owned utilities,” state Atty. Gen. Kamala Harris said in a statement.


“My office will continue to pursue compensation from those who gamed the market and profited from the skyrocketing prices that resulted,” Harris said.

The companies involved, which all disputed FERC’s finding, are Shell Energy North America, BP Energy Co., APX Inc., Illinova Corp. and MPS Merchant Services Inc.

During the 2000-01 California energy crisis, the state’s electricity market suffered a meltdown because of unlawful market activities by various energy sellers.

California spending on wholesale electricity rose from $7.4 billion in 1999 (the first full year of deregulation) to $27.1  billion a year later — a 277% increase.


The soaring costs forced the state to step in and buy electricity for California’s investor-owned utilities when they no longer could no longer afford to pay sky-high wholesale prices. Experts estimated the total damage to California’s economy at more than $40 billion.

Pacific Gas & Electric Co. filed for Chapter 11 bankruptcy and Southern California Edison became technically insolvent.

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