California AG Levels New Claims against Sellers for 2000-2001 Energy Debacle

California Attorney General Jerry Brown filed a complaint on May 22 against 18 named sellers who made sales to the California Energy Resources Scheduling (CERS) Division of the California Department of Water Resources eight years ago from January 18 to June 20, 2001.   The complaint alleges, among other things, that the named respondent sellers:  (1) possessed and exercised undue market power in markets in which CERS was forced to purchase; (2) manipulated these markets by use of gaming practices and physical and economic withholding; and (3) violated their market-based rate tariffs by failing to properly report these sales.  The Attorney General also asserts that FERC’s quarterly transaction reporting requirements in place prior to Order 2001 and market-based rate program in effect during 2000-2001 were insufficient to provide the Commission or other interested parties with the information they needed to evaluate whether sellers had acquired or were exercising market power. 

With respect to reporting, the Attorney General cites to decisions of the US Court of Appeals for the Ninth Circuit holding that, in order for a seller to make sales at market-based rates, FERC must make an initial finding that the seller lacks market power and must have adequate transaction reporting requirements in place so that FERC can monitor the seller’s market position going forward.  The Attorney General alleges both that FERC’s quarterly transaction reporting requirements in effect at the time were inadequate, and that sellers did not comply even with these inadequate requirements. 

Because of the alleged tariff violations and reporting/regulatory deficiencies, the Attorney General argues that sellers did not have a rate on file with the Commission and that any sales to CERS between January 18 - June 20, 2001 should be subject to refund.  The Attorney General thus asks FERC to direct respondent sellers to refund charges to CERS that exceeded the mitigated market clearing price that FERC earlier established to order refunds on sales into California’s organized markets (the Power Exchange and ISO) from October 2000 - June 20, 2001).