“Show me the money” continued to be the refrain from California state officials from the governor on down in the wake of the Federal Energy Regulatory Commission’s conclusion that wholesale energy markets were significantly manipulated in 2000-2001. Duke Energy claimed vindication, while companies cited claimed FERC’s evidence was distorted. And there was a concerted groan from all sides who are desperately waiting for the fat lady to sing.

“This one’s going to put a lot of attorneys’ toddlers through college,” one industry source observed. And EPA take note, it’s also responsible for wiping out whole forests. FERC’s “Final Report on Price Manipulation in Western Markets” alone comes to 400 pages (including appendices). And that doesn’t include the reams of evidence submitted, which the Commission has now released.

Besides the forests, “today’s rulings by the Federal Energy Regulatory Commission are unfortunate and may have serious effects on the stability of electricity supplies throughout the United States,” Lynne Church, president of the Electric Power Supply Association, said in deploring FERC’s failure to finish with the issue.

More than a few economists in Washington and Wall Street, breathed a sigh of relief that the Commission had not voted to unilaterally abrogate forward power contracts, choosing instead to indicate that if forced to vote — which they won’t — they would uphold contract sanctity. Parties were advised to settle.

Before the ink was dry and FERC’s meeting concluded last Wednesday, California’s Gov. Gray Davis fired off a prepared statement: “It took two years for FERC to confirm what we knew all along — there was widespread market manipulation and a massive ripoff of California ratepayers. Now the question is whether the FERC Commissioners will have the grit to order the remedies that are necessary.” He wants up to $9 billion; FERC indicated he may get about $3 billion, about equal what Californians owe power suppliers.

Davis said he will only feel vindicated when the state gets all of its refund monies back. He told news reporters that he wants to be thought of as a “bulldog” who won’t let go until the refunds are paid. He is now publicly promising utility ratepayer refunds late this year and next year.

Several companies, while not exactly ruled Sunday School clean, registered their pride in receiving favorable mention in the otherwise massive indictment of the industry.

“We’re pleased that they appeared to have differentiated our actions in the market from those of others,” said Duke Energy spokesperson, Patrick Mullen, noting “FERC recognized that Duke Energy did not participate in any economic withholding in California’s market, and on the natural gas pricing index issues, we changed our practices when the issue first surfaced in late 2002. So we’re pleased to see the process we use is cited by FERC as a example (having prices for trade indexes come from the chief risk officer, not traders).”

Williams also was happy with the Commission’s conclusion that it did not attempt to corner the natural gas market in California. FERC said there was no evidence to back up allegations of a former employee that Williams attempted to corner the natural gas market in California in January 2001. Mirant said even with recalculating the power formula to direct higher refunds to California, it still is owed considerable money by the state.

Looking at show cause orders for a handful of companies and ongoing proceedings against 37 others, EPSA said its members had hoped that following Wednesday’s meeting, “the industry and this issue would be at the bottom of the ninth inning, but unfortunately we’re only at the seventh-inning stretch – and uncertainty continues in the energy sector. “FERC’s failure to bring to closure the California energy crisis and continued search to assign blame have diminished the incentive for would-be suppliers to invest in generation or transmission in areas where needed, including California. The rulings also extend the regulatory uncertainty that is exacerbating the financial plight of the industry.”

Meanwhile, “nobody in California is going to look at (FERC’s refund of) $3.3 billion number and call it a day,” said state Sen. Debra Bowen, chair of the California Senate’s energy committee. “I’ve believed since Day One this whole thing is eventually going to end up in court because the stakes are just too big. The power generators turned California ratepayers upside-down to shake $8.9 billion in overcharges out of their pockets, and if FERC isn’t willing to enforce the Federal Power Act, we’re going to have to go to court to get that money back.

“There are a couple of things to like and plenty of questions that still need to be answered, but overall it’s terrible news for California ratepayers. FERC finally said the ‘m’ word. It finally acknowledged California’s power market was being manipulated on a day-by-day, hour-by-hour, and sometimes minute-by-minute basis by power generators and natural gas providers. On the other hand, to hear FERC recognize the long-term contracts signed by the California Department of Water Resources were driven by a market that it finally concedes was being manipulated, then brush that aside and refuse to fix the contracts because the state didn’t file a complaint fast enough is ridiculous,” Bowen said.

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