Two FERC administrative law judges (ALJ) last Monday urged the full Commission to approve a settlement agreement reached between Aquila Merchant Services Inc. and FERC trial staff settling allegations that the Aquila Inc. subsidiary was involved in the manipulation of western power markets during the region’s 2000-2001 energy crisis.

FERC, in a June 25 order, formally initiated show cause enforcement proceedings against an estimated 60 energy marketers, as well as municipal and investor-owned utilities, for allegedly gaming the California Independent System Operator (CAISO) and California Power Exchange (PX) markets more than two years ago.

The Commission asserted that Aquila Merchant Services engaged in gaming practices such as false import, cutting non-firm and circular scheduling.

FERC, in a separate June 25 order, alleged that various power entities, including Aquila Merchant Services, may have participated in gaming practices through the use of partnerships, alliances or other arrangements in violation of the CAISO and PX tariffs during the relevant period — Jan. 1, 2000 through June 20, 2001.

The partnership order said that Aquila Merchant Services may have engaged in a false import strategy in a partnership with Public Service Co. of New Mexico.

In late August, FERC staff and Aquila Merchant Services jointly filed a settlement agreement that would resolve all issues set for hearing in the gaming and partnership proceedings as they relate to the Aquila unit.

As part of the settlement, Aquila Merchant Services has agreed to pay $75,975.42 in order to avoid litigation costs to prove that the company’s energy trading practices were proper and in full compliance with FERC regulations and standards. The settlement amount is based on the total revenue associated with the transactions in question.

Aquila has said that it “strongly believes” that the allegations against Aquila Merchant Services do not have any merit and that the unit’s trading activities “did not violate any tariff, regulation or statute, or adversely affect market prices.”

Carmen Cintron and Isaac Benkin, the two FERC ALJs overseeing the gaming and partnership proceedings at the agency, on Monday recommended that the full Commission approve the settlement agreement.

Cintron recently recommended that FERC approve gaming-related settlement agreements separately reached between FERC trial staff and San Diego Gas & Electric Co. and American Electric Power (see NGI, Nov. 10).

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