Curtis Wagner, FERC’s chief judge, last week reversed course from a decision he reached in late June and said that he will certify to the full Commission a settlement between Avista and FERC staff aimed at resolving allegations that the power company engaged in trading strategies designed to manipulate California’s energy markets in 2000-2001.

FERC trial staff, Avista Utilities and Avista Energy Inc. agreed to resolve the case in January after an extensive investigation. Trial staff concluded there was no evidence that Avista had knowingly engaged in or facilitated any improper trading strategies, nor that Avista engaged in efforts to manipulate western energy markets, and that Avista cooperated fully with the staff investigation. A proposed settlement was filed by FERC staff and the companies on Jan. 30.

Wagner in April said that he couldn’t certify the settlement on the grounds that it appeared to conflict with a FERC staff report on manipulation of western energy markets issued in late March, as well as an October 2002 California Independent System Operator report analyzing trading and scheduling strategies utilized by Enron Corp.

More recently, FERC staff in May submitted a supplemental report in which staff performed additional analysis related to the issues raised by Wagner in April. The supplemental report did not alter FERC staff’s conclusions reached in an initial report attached to the Jan. 30 settlement. FERC staff, Avista Utilities and Avista Energy strongly urged Wagner to certify the proposed agreement and the full Commission to approve it.

Wagner on June 25 issued a decision in which he declined to certify the settlement. He said, “There are numerous issues of material fact that remain unanswered in this proceeding to date.” Among other things, Wagner said that there is a “void of evidence” with respect to affiliate transactions. He also said that there needs to be evidence to explain concerns expressed in the late March staff report regarding allegations that Avista Utilities and Avista Energy engaged in the Enron trading practices of “Ricochet,” “Get Shorty” and counter-flow revenues from cut schedules in real time. “The definition of what these three practices are [is] in dispute,” wrote Wagner.

On the same day that Wagner issued his decision in June, FERC issued show cause orders to dozens of companies related to potential gaming of the California market (see NGI, June 30).

Wagner last week noted that those orders provided clarification and clear definitions of the gaming practices that are in dispute in the Avista case. “There is no question concerning the fact that the issues in those cases are identical with the issues addressed in this proceeding and that the definitions would directly cover the allegations concerning Avista here,” he wrote. “These orders dispose of the dispute in this proceeding regarding the definition of Ricochet transaction, Get Shorty and Death Star.”

Indeed, FERC trial staff, in its appeal of Wagner’s June 25 decision, pointed out that the dispute over the definitions of ricochet, get shorty, and counterflow revenues from cut schedules in real time were resolved by FERC in the show cause orders.

Wagner on Thursday found that “there are no unresolved issues of material fact and that the record is sufficient for the Commission to make a determination on the merits” of the Avista settlement, saying that he will certify the agreement to FERC for its consideration.

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