Feds ordered to reconisider 2001 California public
By Julia Cheever, Bay City News Service
December 20, 2006
SAN FRANCISCO (BCN) - A U.S. appeals court in San Francisco
yesterday ordered the Federal Energy Regulatory Commission to
reconsider a state agency's claim that California was overcharged
$1.4 billion in several long-term electricity contracts in 2001.
California Public Utilities Commission President Michael Peevey
said the court ruling by the 9th U.S. Circuit Court of Appeals
was "a big victory for the PUC and California's consumers.
The ruling puts another $1.4 billion back on the table for California's
During the state's energy crisis in 2001, the California Department
of Water Resources negotiated power contracts with five wholesale
suppliers, including San Diego-based Sempra Energy and Houston-based
Dynergy Power Marketing Inc. Consumers pay for the contracts through
increased electricity rates.
After electricity prices began to fall in mid-2001, the state
PUC sought to have the contracts modified, but FERC, the federal
panel regulating wholesale energy rates, turned down the claim
in 2003. The PUC then appealed to the 9th U.S. Circuit Court of
Appeals, which ruled that FERC used an incorrect interpretation
of two 1956 U.S. Supreme Court decisions when it turned down the
Peevey said the ruling "revolutionizes the law" on
the application of the high court decisions to power contracts
by making clear that a contract with a wholesale rate exceeding
"a zone of reasonableness" affects the public interest.
FERC spokesman Bryan Lee said the commission has the ruling "under
review and will respond in due course."
Sempra Energy intervened to become a party in the case. Sempra's
general counsel, Javade Chaudhri, said: "We are still reviewing
the court's decision and whether we will seek further appellate
review of this ruling."
Chaudhri added, "We believe the contracts were and are beneficial
to the state of California and should be upheld under whatever
standard the FERC ultimately applies."
Copyright © 2006 by Bay City News, Inc. -- Republication,
Rebroadcast or any other Reuse without the express written consent
of Bay City News, Inc. is prohibited.