Lockyer
proposes changes to state, federal energy
rules
SACRAMENTO (AP) -- State and federal energy
laws and regulations are stacked against
California officials who are seeking refunds
for overpriced electricity during the energy
crisis, a report by the California attorney
general released Tuesday concluded.
Federal
energy regulations continue to create ''enormous
incentives on the part of generators to
try and create an energy crisis in the future
because of the massive potential for profits''
and lax enforcement of the rules, said Ken
Alex, a deputy attorney general.
''At
least part of the energy crisis, we believe,
has been caused by the abuses of the deregulated
market,'' said Alex, who headed Attorney
General Bill Lockyer's energy task force.
He
singled out electricity generators accused
of manipulating the wholesale energy market
to drive up prices, saying their games ''created
a dysfunctional system.''
The
state is seeking $9 billion in refunds for
overcharges during the 2000-2001 energy
crisis, when wholesale prices hit record
highs. The Federal Energy Regulatory Commission,
which oversees wholesale energy markets,
has ruled that the state is due about $3
billion.
''I
think it's fair to say that three years
after the end of the energy crisis, we are
frustrated that we haven't recovered some
of the billions of dollars Californians
were overcharged,'' Alex said.
FERC
spokesman Bryan Lee disagreed with Lockyer's
assessment of both the cause of the energy
crisis and how federal regulators reacted
to California's plight.
The
commission ''has done everything within
its legal authority to rectify the unjust
and unreasonable prices that occurred in
2000 and 2001,'' Lee said, pointing to more
than $100 million in FERC-ordered refunds.
Lockyer's
report was correct in saying laws would
have to be changed for FERC to go beyond
what it has already done, Lee said. However,
the report ''conveniently downplays the
state's own culpability in insisting upon
a fatally flawed market design.''
FERC
also took issue with the report's finding
that price spikes were due to market manipulation,
Lee said. FERC's own investigation found
that ''none of the manipulation would have
been possible if not for the underlying
supply-demand imbalance and improper market
design.''
The
1996 deregulation law was designed to open
the wholesale and retail electricity markets
to competition. Utilities sold many of their
power plants, and then bought wholesale
power through a day-ahead market. Eventually,
utilities would be allowed to raise or lower
customers' rates based on wholesale prices.
But
wholesale rates soared in 2000, before most
utilities could escape a retail rate cap
imposed by state regulators as part of the
deregulation law. The utilities then ran
up huge debts, requiring the state to step
in and buy wholesale energy on their behalf.
Among
the changes Lockyer's report proposes is
the elimination of the federal ''filed rate
doctrine,'' which states that once a wholesale
electricity seller files its rates with
FERC, that rate cannot be challenged retroactively.
That
works for cost-based electricity markets,
Alex said, but it doesn't make sense to
use it when that switches to a market-based
system.
Alex
said FERC has ruled that when the buyer
and seller agree on a price, even if it's
in a market rife with manipulation or fraud,
that price is considered to be the filed
rate and cannot later be challenged.
This,
Lockyer said, ''gives energy companies a
license to steal from California ratepayers.
We're asking Congress to revoke that license.''
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