Following up on its long-standing protest of a FERC trial unit’s settlement with Spokane, WA-based Avista Corp. over alleged trading violations, the California Attorney General’s Office came out swinging late Wednesday in response to the federal regulators ratifying the deal and concluding that the holding company’s utility and trading units had not manipulated wholesale energy markets during the western crisis of 2000-2001.

The regulators approved their trial staff’s conclusion of no wrongdoing, which earlier was certified by the regulatory commission’s chief judge. The later actions were what California Attorney General Bill Lockyer vociferously protested.

“We objected on several grounds,” said Tom Dresslar, a spokesperson for the attorney general. “[The settlement] resulted from secret talks between [FERC] staff and Avista. California parties had no opportunity to perform discovery and present evidence. FERC staff conducted virtually no investigation.

“There is plenty of evidence from other proceedings to show Avista knowingly engaged in ricochet transactions and other market misconduct. We estimate Avista is liable for about $10 million worth of wrongdoing. Under this settlement, they will pay nothing. So, where before FERC’s sweetheart deals with price gougers at least provided pennies on the dollar, this one provides ‘nada’ [nothing] on the dollar.”

Earlier Wednesday, Avista CEO Gary Ely said the company is “pleased to have the matter concluded” after Avista Utilities and Avista Energy were exonerated of allegations and charges that have been leveled against many of the major wholesale energy players in the West. The company noted through a spokesperson that it has never calculated the cost of responding to the FERC investigation and most likely the amount will stay buried in the company’s operating/maintenance expenses recovered in utility rates.

“We don’t have the final FERC legal costs, and I can not be sure those have been calculated separately, but clearly they have never been disclosed in any of our SEC filings,” said an Avista spokesperson. “I don’t think they will ever be called out as a line item; I think they will just be included as a cost of doing business going forward as are a lot of legal fees for other cases.”

FERC Chief Administrative Law Judge Curtis L. Wagner Jr. had certified the agreement last July, finding that the FERC trial staff conclusions were that “no unresolved issues of material fact” were outstanding, and “the record [was] sufficient for the [FERC] to make a determination on the merits of the settlement” between the companies and the trial staff. FERC commissioners concurred on Wednesday.

Trial staff had noted that Avista cooperated fully with the FERC investigation and did not attempt to withhold any relevant information, along with concluding there was no evidence that anyone at the Avista companies knowingly “engaged in or facilitated” improper trading or manipulation of the wholesale energy markets.

Dresslar noted that FERC earlier in the week said it was “doing everything within its authority to remedy price gouging. That is patently false,” said Dresslar. “This action illustrates the problem California has faced all along — a federal regulator with a callous disregard for basic fairness, due process and California consumers.

“Our White Paper [released to Congress last Tuesday] detailed how FERC has failed miserably to do its job. This settlement exemplifies that failure. It’s not even a slap on the wrist. It’s a kiss on the cheek.”

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