The Ninth Circuit Court of Appeals in San Francisco took little time in rejecting an emergency request by the California legislature to force FERC to cap wholesale energy prices. The request was filed last Tuesday and tossed out by Friday. The panel ruled that the legislature did not demonstrate that the case warranted emergency action.

Senate President John L. Burton, Assembly Speaker Robert Hertzberg and the City of Oakland filed the emergency petition with the federal appellate court. Burton and Hertzberg, who like Gov. Gray Davis are Democrats, argued that FERC was failing in its duty to ensure just and reasonable rates in the wholesale power market, and was allowing generators and marketers to illegally manipulate the market and create rolling blackouts that threaten public health and safety, they said.

Their suit urged the court to block FERC from extending current authorizations for market-based rates as requested by Williams and AES, and eventually do the same to other merchant generators in the state, such as Dynegy, Duke and Reliant Energy. They contended that FERC not only failed to define what rates are just and reasonable, but “what constitutes market power that makes rates unreasonable with the kind of market-based rates that FERC regulates.” The legislators acknowledged that FERC was entitled pursue a “long-term, fundamental restructuring of the market to bring about just and reasonable prices at some time in the future.” However, in the meantime, it needs to take steps to assure just and reasonable rates in the present and near-term future.

The lawsuit was having some political impact last week. It caught the eye of the two new FERC commissioners, who mentioned it as an area of significant concern in interviews with NGI on Friday (see Daily GPI, May 29). And Davis hoped it would provide some leverage for price caps in discussions with the president. Instead, the court decision was announced shortly before the president told Davis and California business leaders price caps would not work and he was definitely opposed to them.

California continues to suffer from exorbitant electricity prices because of a confluence of events that have led to blackouts six times already this year and the bankruptcy of its largest utility, Pacific Gas & Electric Co. The worst could be yet to come this summer. Meanwhile, the state legislature has been struggling for months to find a solution.

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