June 2003

FERC Aims Series of Orders at Western Crisis

(June 30) The Federal Energy Regulatory Commission issued a series of orders June 25 designed to set matters right in the wake of the Western energy crisis and to prevent a recurrence of such energy market meltdowns. The commission:

• denied refunds for spot market sales in the Pacific Northwest during the energy crisis;
• ordered some 50 private power companies and public power utilities to justify their prices and marketing strategies during the Western crisis or disgorge unjust profits from sales that violated tariff conditions of the California Independent System Operator and the California Power Exchange;
• denied complaints by Snohomish County, Wash., Public Utility District and others seeking to modify long-term contracts signed during the height of the energy crisis;
• directed staff to investigate bidding practices and ask sellers to explain bids of more than $250 per megawatt-hour into the California spot market,
• proposed rules to require all market-based tariffs and natural gas blanket sales certificates to include provisions prohibiting anti-competitive behavior, subject to disgorgement of unjust profits and possible revocation of their market-based rate or blanket certificate authority (see story, this page);
• proposed to require jurisdictional utilities to file financial reports quarterly rather than annually. In addition to a basic set of financial statements, these reports must contain a management discussion and analysis of the company’s financial condition and operating results;
• issued an interim final rule for investor-owned utility cash management programs that is designed to protect regulated utilities from being drained by unregulated subsidiary companies; and
• revoked the electric market-based rate authority of Enron Power Marketing and Enron Energy Services, plus the natural gas blanket marketing certificates of six other Enron affiliates.

In addition, staff said they expect to file a report by the end of July on a preliminary investigation of physical withholding of power during the California crisis. At that time, FERC will tell the companies whether it is dropping them or will continue to investigate. Any further investigations should be completed by January 2004, staff said.