One big question arises in the wake of a recent appeals court decision that orders the Federal Energy Regulatory Commission (FERC) to reopen this state’s claim for more rebates from the piracy practiced during the energy crunch of 2000-01:
Will consumers and businesses at last get some of the refunds that should be coming to them?
For almost six years after the end of the crunch, electric customers have received virtually no rebates of the money stolen from them by generating companies. And grand theft it was, even if some courts and journalists prefer to label it “market manipulation.”
Immediately after it ended, then-Gov. Gray Davis claimed that Californians had been cheated out of $9 billion by energy companies he called “buccaneers.”
Davis was quickly labeled a whiner, but now it looks like he was close to the mark. Generators like Reliant Energy, Mirant Energy, Dynegy Corp., AES, Sempra Energy, Duke Power, the Williams Companies and Enron Corp. have so far been assessed more than $6 billion, with several lawsuits and claims still pending.
The unanimous decision by a three-judge panel of the Ninth Circuit Court of Appeals puts another $1.4 billion in state claims back on the table, with a reluctant FERC forced to think once again about its past role as an enabler of the crisis.
The ponderous federal commission refused to act for more than 18 months after it was urged by Davis, former state Atty. Gen. Bill Lockyer and many others to limit the price of electricity sold from one state to another. The moment it finally set such caps, prices dropped, supplies increased and the crunch ended. It’s no wonder FERC prefers to downplay its repeated failures to act.
That’s why most settlements to date have come from court actions, with consumers getting back virtually none of the cash stolen from them. Theft it certainly was, as attested by the corps of onetime energy traders now nursing felony convictions.
One thing FERC could do to begin to redeem itself now that it will have to reopen this subject it so hates to remember: Put refunds in the hands of actual customers.
It’s plainly unjust that virtually none of the money “recovered” so far has found its way to electric power users who were bilked. One reason is that relatively few of the settlements to date came in cash.
About half the total takes the form of renegotiated long-term power contracts or cancellation of past debts owed to the generators by big utilities like Southern California Edison and Pacific Gas & Electric. When Lockyer and FERC trumpeted that this might help lower future energy bills, it came as cold comfort to customers who prefer cash in hand to promises of a rosy future. And it has yet to produce lower electric bills.
In one frustrating settlement, Sempra agreed to repay $5.7 million in overcharges to San Diego Gas & Electric Co. over two years starting in 2009. Of course, since Sempra owns SDG&E, it remains to be seen whether this will produce anything more than an internal accounting memo. Sempra admitted no wrongdoing in that case.
Then there’s about $1.8 billion in IOU’s from bankrupt power sellers like Enron, where collecting on the debt seems unlikely at best.
Now, thanks to the court ruling, the five-member FERC gets another crack at making things right. Some skeptics wonder whether the same agency that never heeded California’s distress signals before will do much for California consumers now.
But at least FERC will have to reopen the question of whether outfits like the Los Angeles Department of Water & Power, Sempra, Dynegy and others must pay some cash back for the gouging contracts they foisted on the state in 2001.
So far, FERC has tried to avoid ordering refunds on these contracts by noting that its October 2000 announcement that companies might have to make amends did not mention the extorted 2001 contracts.
By that standard, every time a car fails a smog test, the owner could claim to be exempt from smog laws because those laws never specifically mention him or future problems he might have with his car. That’s ludicrous, of course, and the oft-criticized Ninth Circuit understood it.
Still, Californians should not hold their breath waiting for FERC to help them out, because it never has before. But the Democrats who now control Congress have said they want to fix the current power-trading system.
Well they should. For something is seriously wrong with an arrangement that allows settlements which produce no cash refunds, no actual penalties to most thieves and no significant restitution for consumers who did pay cash while they were being robbed.