Grid operators ask for refunds

The Associated Press
Saturday June 09, 2001

Four major power suppliers to California have shown they can control prices in the wholesale electricity market and should have to refund excess charges, possibly up to billions of dollars, state grid officials said Friday. 

The Independent System Operator, keeper of the state’s power grid, also asked the Federal Energy Regulatory Commission to revoke the market-based rate authority for four generators – Duke Energy, Mirant, Dynegy and Reliant Energy. 

ISO analysts have estimated the state was overcharged about $6.7 billion between May 2000 and March 2001. That includes charges by generators other than the four in these filings, and ISO officials didn’t have an estimate on how much they were seeking from Duke, Reliant, Mirant and Dynegy. 

In order to escape charging cost-based rates, generators must prove to FERC that they don’t have market power — the ability to charge whatever price they want without consequence. Suppliers have to have that authority renewed by FERC every three years, and most are up for review this summer. 

ISO attorney Charles Robinson said the companies have exhibited they have market power and the ability to charge market-based rates should be revoked. The ISO asked FERC to act on their request by June 28. 

Tom Williams, spokesman for Duke Energy, said company officials were reviewing the filing and would respond soon. Richard Wheatley of Reliant Energy said the ISO order was “nothing but a rehashing of previous allegations that have been repeatedly rejected by FERC.” 

If FERC finds the companies do have market power, they could order them to use cost-based rates, which limit company profits to a percentage above the costs to produce power. 

“If there is a substantial change in the market, they have to make another filing with FERC. With the demise of the PX, the bankruptcy of PG&E, the financial difficulty of Edison – certainly that compelled the suppliers to file about those changes,” Robinson said. 

The Power Exchange, or the PX, was the state’s power market, but filed for bankruptcy after its largest customers, San Diego Gas and Electric Co., Pacific Gas and Electric Co. and Southern California Edison, stopped purchasing power. The state now buys power for customers of those utilities directly from generators. 

The agency has already made similar requests regarding two other energy companies, Williams and AES. 

If the companies are found to have charged excessive rates, FERC can order refunds. 

But ISO officials said in their filing that “the potential for after-the-fact refunds is little comfort to the elderly consumer, who, because of outrageously high prices, was forced in the interim to forego air conditioning notwithstanding serious health implications, or to the small business that was forced to close its doors.” 

Though ISO estimates $6.7 billion has been overcharged, some of that comes from companies not under FERC’s jurisdiction, such as Canadian firms or municipal districts. 

FERC has ordered $125 million in refunds, saying it can only examine prices for power sold during Stage 3 emergencies, when reserves drop to below 1.5 percent. 


On the Net: 

The California Independent System Operator: www.caiso.com