Southern California Water Co. and a Washington State public utility district (PUD) are charging that “one or possibly two” FERC commissioners may have violated the federal agency’s rules against ex parte communications by participating in a conference call with Wall Street analysts in which the commissioners apparently addressed pending challenges to power contracts entered into with power suppliers.

Southern California Water is challenging the prices included in a power contract it entered into with Mirant Americas Energy Marketing LP, while Public Utility District No. 1 of Snohomish County, WA, is asking FERC to modify a power supply deal it entered into with Morgan Stanley Capital Group Inc.

But in an April 7 filing at the Commission, Southern California Water and the PUD said that FERC Chairman Pat Wood and Commissioner Nora Brownell may have violated the Commission’s rules against ex parte communications by “speaking about the merits” of pending power contract cases with a “select group of Wall Street analysts” in a password protected conference call on March 26. Southern California Water and the PUD attached to their filing a Dow Jones Newswires article that detailed portions of that conference call.

Southern California Water and Snohomish said that the conference call is an “especially troublesome” violation of FERC’s rules against ex parte communications in the context of the power contract cases “in which one of the disputed issues is the possible effect of modifying these power contracts on investment in the energy sector.”

By participating in the conference call, commissioners “afforded interested persons — potentially affiliated with witnesses and parties on one side of these cases — an opportunity to influence the Commission’s decision in an off-the-record forum that was held without notice to and outside the presence of the other parties.”

Southern California Water and the PUD noted that one of the parties in these cases is Morgan Stanley Capital Group, which is an affiliate of a prominent Wall Street investment and brokerage house. Snohomish and Southern California Water noted that it is unclear whether Morgan Stanley Capital Group or its affiliates participated in the conference call or what steps, if any, the commissioners took to ensure that Morgan Stanley Capital Group was not represented.

“Moreover, the energy trading concerns represented among the respondents in these cases undoubtedly have commercial or consulting arrangements [with] many Wall Street firms, and it is unclear whether any of these firms were represented on the conference call.”

Snohomish and Southern California Water are also upset that pending power contract cases were discussed by FERC Commissioners at a press briefing following the agency’s March 26 agenda meeting. “The discussion of these cases at the March 26 press conference, while public, occurred without notice to the parties and outside the record available to a reviewing court. Yet they involved substantive discussion of the applicable law and facts of these still-pending cases,” the PUD and Southern California Water asserted.

Snohomish and Southern California Water therefore asked FERC to direct “decisional employees,” including Commissioners, to disclose off-the-record communications they made or received in the press conference and conference call, as well as any other off-the-record communications made or received in connection with the cases. These disclosures should be made part of the record, the PUD and Southern California Water said.

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