Thirteen years after the 2000-01 energy market meltdown there are still parts of old legal and regulatory cases emerging in California that carry potentially multi-billion dollar consequences. Two cases emerged the first two weeks of April — one in the U.S. 9th Circuit Court of Appeals in San Francisco and other at California’s state regulatory commission in the same city.

A three-judge federal appeals court panel kept alive a composite of lawsuits by large natural gas users against a whole host of trading companies, some of which no longer exist. The claims all stem from the 2000-01 period when alleged and real market manipulation charges were rampant in the natural gas and electricity trading sectors (see Daily GPI, April 29, 2010; May 30, 2006; Nov. 14, 2003; Oct. 18, 2002).

Meanwhile, the California Public Utilities Commission (CPUC) announced it has been informed of two favorable court rulings, which together with a recent Federal Energy Regulatory Commission (FERC) judge’s decision, could return up to $3 billion to the state for overcharges during the 2000-01 crisis period.

In the latest decisions, the CPUC said the U.S. Court of Claims in Washington, DC, held Bonneville Power Administration (BPA) and the Western Area Power Administration (WAPA) liable for up to $1 billion in refunds for electricity they sold to California at extremely high prices. California has been seeking refunds from BPA and WAPA for the past 11 years, the CPUC spokesperson said.

The gas cases are more complex and consolidate dozens of cases filed in five states — Nevada, Missouri, Kansas, Colorado and Wisconsin — and lumped together in a Nevada trial court in which the trading companies were earlier upheld. The 9th Circuit ruling reverses that in part.

“Plaintiffs, retail buyers of natural gas, alleged that the defendants [which include companies like American Electric Power, CMS Energy, Coral Energy Resources, Northern States Power, Duke Energy, Dynegy, El Paso Natural Gas, Oneok and the Williams Cos.] manipulated the price of gas by reporting false information to price indices published by trade publications and engaging in wash sales,” according to the April 10 decision of the three judges, Carlos T. Bea and Paul J. Watford, circuit judges, and William K. Sessions, district judge.

The district court ruled against the plaintiffs, finding that state law antitrust claims were preempted by the federal Natural Gas Act. The three-judge panel reversed this, and also held that the 2003 enactment of the FERC Code of Conduct did not affect the panel’s conclusion that the Natural Gas Act does not grant FERC jurisdiction over claims arising out of false price reporting and “other anti competitive behavior associated with non jurisdictional sales.”

The defendants were given 14 days to file a motion for rehearing of the decision by the three-judge panel.

While the chaos of the 2000-2002 period in the energy markets, particularly in California and the West, seems distant, the beginnings of these legal actions date to 2001, and the filing of various class action lawsuits around the nation that were eventually consolidated into a multi-district litigation in the District of Nevada.

With the appellate panel’s ruling, the plaintiffs “class certification” action remains in force, allowing their consolidated case against the gas marketers to proceed under the laws of different states, an attorney for the plaintiffs told news media last week.

In today’s relatively quiet, low-priced gas price market, the reemergence of these cases cite times and places in which gas prices were spiking three or four times their previous levels, impacting both the wholesale gas and power sectors.

In the power refund cases monitored by the CPUC, it was noted that a year ago the same Washington, DC, court held that BPA and WAPA were responsible for refunds for other categories of sales during the crisis period. “In total, [the two federal power agencies] now face the prospect of close to $2 billion in refunds to California,” the CPUC spokesperson said.

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