FERC last Wednesday turned aside requests for rehearing filed by various California parties related to the Commission’s approval earlier this year of a settlement reached between Reliant Resources Inc. and FERC staff under which the generator agreed to pay $13.8 million for withholding electricity from the state’s market on two days in June 2000.

The agreement, which was approved by the Commission in a Jan. 31 order, resolved all issues arising from actions taken on June 20 and 21, 2000, when certain Reliant employees withheld 1,000 MW from customers of the California Power Exchange (CalPX) apparently in an attempt to ratchet up forward prices for electricity [PA02-2-001].

The agreement grew out of a broader investigation by FERC staff related to whether any entity manipulated short-term prices for electric energy or natural gas, or otherwise exercised undue influence over wholesale power prices in the West.

In response to the order, Southern California Edison on Feb. 10 filed a motion to intervene and request for rehearing and clarification. That same month, the city of Vernon, CA, moved to intervene and requested rehearing of the decision. And in March, motions to intervene and requests for rehearing and clarification were filed by the California Public Utilities Commission, the California Electricity Oversight Board, Pacific Gas & Electric Co. and California Attorney General Bill Lockyer.

The petitioners conceded that FERC’s regulations don’t provide for intervention as a matter of right in investigations but asked that FERC grant their intervention nonetheless. The California parties argued that they should be allowed to intervene in the proceeding on the grounds that their interests are not represented by either Reliant or FERC staff.

But FERC this week underscored the point that its regulations “clearly distinguish” investigations from other proceedings. “The Commission is not persuaded to grant intervention as a matter of discretion,” the order stated. FERC said that under the Federal Power Act (FPA), it has exclusive authority to enforce the FPA and that decisions to pursue and resolve issues under investigation are solely within the Commission’s non-reviewable discretion.

“To allow third parties to participate in and second guess the Commission’s decisions in investigations could also cripple its ability to prosecute and settle such investigations, because the subjects of the investigations would be very reluctant to enter into settlements for fear that they could be reopened.”

At the same time, FERC did clarify one aspect of its Jan. 31 order. In that decision, FERC said that the agreement is an effort to resolve “any possibility that Reliant’s actions may have resulted in rates that harmed customers in the CalPX,” that the payment “puts CalPX customers in the position they would have been in had Reliant bid in the additional MWs as a ‘price taker'” and that Reliant “has agreed to pay the CalPX customers who suffered financially.”

The Commission clarified that the agreement approved in the Jan. 31 order only addresses the Reliant traders’ actions of June 20 and 21, 2000 with respect to sales in the CalPX day-ahead market, as described in the agreement, and is limited to the effects of those actions in the CalPX day-ahead market.

FERC also noted that the Reliant settlement resolved “but a small piece of the entire investigation conducted by staff.” The Commission said that it has acted on other aspects of the investigation “and will continue to consider remedies for inappropriate behavior by market participants and additional grounds for remedial relief.”

A FERC staff report stemming from the broader investigation issued last month concluded the wholesale natural gas and electricity markets in California and other western states were significantly manipulated during the critical 2000 and 2001 period (see NGI, March 31).

FERC issued two show-cause orders against several Enron-affiliated companies, BP Energy and Reliant Energy Services, which are likely to result in more proceedings at the Commission, and additional show-cause hearings involving other energy companies are expected.

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