On November 10, 2014, FERC approved a contested settlement between several California utilities and the California Public Utilities Commission (collectively, the “California Parties”) against the California Department of Water Resources (“CDWR”), State Water Project for actions that arose during the western energy crisis from 2000 – 2001. Under the settlement, the CDWR State Water Project will pay $26.6 million to the California Parties for its actions during the western energy crisis.
In August of 2000, FERC instituted a hearing proceeding under section 206 of the Federal Power Act (“FPA”) to investigate the justness and reasonableness of utilities’ rates and charges that sell energy and ancillary services in the California Independent System Operator Corporation (“CASIO”) and California Power Exchange (“CalPX”) markets. As a result of that hearing, FERC directed its staff to initiate a fact-finding investigation into allegations of market manipulation of electric and natural gas prices in the western markets, and later to investigate anomalous bidding activity in western energy markets.
The instant settlement resolves all claims by the California Parties against the CDWR State Water Project for its actions during the 2000 – 2001 time period, and resolves FERC’s market manipulation investigation of CDWR State Water Project. In addition, the settlement allows for any entity that bought or sold energy through CAISO or CalPX to be bound by the terms of the settlement, however, any entity that does not opt into the settlement will not forfeit any of its rights or claims.
Also on November 10, 2014, FERC issued Opinion No. 536, a separate, concurrent order related to the 2000 – 2001 time period in the western energy markets, which affirmed an Administrative Law Judge’s (“ALJ”) initial decision that found that power prices required mitigation and that several utilities should pay refunds.
Opinion No. 536 resulted from FERC’s fact-finding investigations into the western energy markets during the western energy crisis. As a result of its investigations, FERC initiated hearing procedures to calculate refunds related to its investigative findings. Upon establishing the procedures for calculating the required refunds, judicial review was sought and the United States Court of Appeals for the Ninth Circuit remanded the matter back to FERC for additional review. On remand, an evidentiary, trial-type hearing was initiated to determine whether any utility seller violated its tariff provisions during the 2000 summer and whether any such violations affected market-clearing prices. As a result of that hearing, the ALJ ruled that several selling utilities had violated their provisions, those violations affected market-clearing prices, and that the Bonneville Power Administration (“BPA”), Western Area Power Administration (“WAPA”), Powerex Corp., Avista Energy, TransAlta, and Constellation NewEnergy Inc. (“Constellation”) should pay refunds. Powerex, Avista, and TransAlta later settled their claims similar to the CDWR State Water Project.
In Opinion No. 536, FERC affirmed the ALJ’s findings that the utilities violated their tariffs. While FERC upheld that BPA and WAPA had violated their tariffs, FERC determined it had no authority under the FPA to order relief from them due to their status non-jurisdictional entities, and therefore was only left to affirm the initial finding of the Constellation refund.