State Granted Access to Files of Power Suppliers

WASHINGTON —  In a victory for California, federal regulators agreed Wednesday to allow state officials to submit evidence of market manipulation by energy companies as they seek to win $9 billion in refunds for excessive power costs.

The Federal Energy Regulatory Commission, responding to a court ruling, unanimously agreed to institute a special 100-day “discovery” period for state officials to access the records of power suppliers. As part of the discovery, the state will be able to look for -- and submit to FERC -- any evidence of market manipulation by energy companies. Such evidence had previously been ruled off-limits.

Any evidence developed during the discovery process would be considered by the full FERC board when it makes its final determination on refunds for California, most likely in the spring.

“We want to put this thing to bed,” said FERC Chairman Patrick H. Wood III, referring to the politically charged litigation resulting from the California debacle. “People have a right to justice.”

California officials and utility executives were pleased by the decision, saying it should strengthen the case for refunds. The order allows the state to submit documents in the refund case that have been subpoenaed in various investigations into market manipulation.

“The order, and the federal appeals court ruling it implements, vindicate the position we have taken all along -- that FERC had ignored substantial evidence of market misconduct in calculating, and limiting, our refunds,” California Atty. Gen. Bill Lockyer said. “Hopefully, the end result of today’s order will be to increase the compensation California electricity consumers receive from the power sellers that gouged them during the energy crisis.”

In August, the U.S. 9th Circuit Court of Appeals in San Francisco agreed with California officials that the scope of the FERC proceeding into refunds should be expanded to take into account alleged market manipulation. However, the court left it to the agency to set up a process for developing new evidence and bringing it into the refund case.

Generators had argued for a narrow window, saying the new discovery duplicates and conflicts with a continuing FERC investigation into market manipulation.

But FERC adopted important elements of the framework proposed by California officials. As the state had requested, the parties in the case will have a full 100 days to probe for new evidence of misconduct during the period from Jan. 1, 2000, to June 20, 2001, when federal price limits went into effect.

The refund case is complex because it involves poring over reams of data on hourly prices for wholesale electricity to ascertain whether they were fair.

Until now, the process involved computing what would have been a “just and reasonable” price and then comparing that with actual prices charged during the height of the energy crisis.

Power sellers repeatedly have denied manipulating electricity prices during the state’s energy crisis, but evidence has emerged of questionable conduct.

In October, Enron Corp.’s head of Western power trading pleaded guilty to conspiracy to commit wire fraud for his role in dubious trading schemes, and several energy-trading firms have admitted that employees lied about prices to trade publications that compile influential price indexes.

Gov. Gray Davis, who has criticized FERC as slow to respond to California’s problems, again blasted the commission.

“It’s too bad we have to go to court to get FERC to do the right thing,” the governor said in a statement. “At least the 9th Circuit understands what FERC still doesn’t seem to: The electricity market was manipulated and California is still owed billions. The question remains: Why is FERC protecting the energy companies and not California ratepayers?”

Carl W. Wood, a member of the California Public Utilities Commission, called the FERC ruling “useful as far as it goes” but said he would have preferred FERC to enforce 2-year-old subpoenas from the state PUC that generators have ignored.

“We will get boxes and boxes of information” because of the new discovery, Wood said. “To pull this stuff together and make any sense out of it probably can’t be done” in the 100 days.

FERC spokesman Kevin Cadden said the commission gave the state what it asked for and was working to bring the matter to a close because “we want to bring certainty to California customers and to the marketplace.”

According to the FERC timetable, the fact-finding period will close Feb. 28.

Alonso-Zaldivar reported from Washington and Rivera Brooks from Los Angeles.