Power Engineering - California entities file evidence supporting more than $7.5 billion in energy cost refunds

ROSEMEAD, Calif., March 3, 2003 -- Southern California Edison (SCE) and four prominent California entities submitted to the Federal Energy Regulatory Commission (FERC) Monday the results of over three months of investigation into why the state's wholesale power costs skyrocketed during the recent energy crisis.

The filing will argue that evidence has been discovered supporting consumer refunds totaling more than $7.5 billion, in contrast to the $1.8 billion refund order currently under consideration by FERC.

A protective order requires the California entities to keep the newly-discovered evidence confidential.

"We have uncovered substantial new evidence of pervasive violation of market rules by many of the major merchant sellers in California's wholesale power markets," said SCE Chairman John Bryson. "We will continue to press FERC to order that the billions of dollars of overcharges resulting from these practices must be returned to California utility customers."

The filing will cite evidence of widespread market manipulation by merchant generators and marketers including withholding available power at times when additional supplies were needed, thereby artificially driving up prices, and illegally gaming various power markets. Tomorrow's filing also includes evidence of energy traders partnering with California municipal utilities in order to accomplish their gaming tactics.

EPSA President Lynne H. Church in a statement urged FERC to be thorough and to examine the multiple causes of the energy crisis. "The causes of the California energy crisis were numerous," Church said. "Recent inquiries into the severe shortages and rising prices of 2000 and 2001 point to a combination of factors, including a flawed restructuring plan, rising demand, a supply shortage and regulatory missteps.

"It's important that FERC conduct an extensive and thorough inquiry into the question of whether market manipulation on the part of some suppliers also contributed to the increase in prices. However, it is our hope that it is conducted expeditiously."

The claims arising out of the California crisis have led to an atmosphere of uncertainty in Western power markets, EPSA said. The uncertainty could hurt market participants' credit ratings and opportunities to invest in the power supplies they need to conduct their business.

The "California Parties" who conducted the 100 days of discovery included SCE, Pacific Gas & Electric, the California Public Utilities Commission, the California Electricity Oversight Board, and the California Attorney General.

"All indications are that California and other Western states will again face shortages of electricity in the not too distant future," Church said. "We must stop focusing on the past and begin the work of building stable markets with regional systems of transmission and oversight. Otherwise, the events of 2000 and 2001 are bound to repeat themselves."

An Edison International company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 12 million via 4.5 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California. For more information on the California electricity market, see www.sce.com .

EPSA is the national trade association representing competitive power suppliers, including independent power producers, merchant generators and power marketers. These suppliers, who account for more than a third of the nation's installed generating capacity, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers. Web: www.epsa.org

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