Additional analysis performed by FERC trial staff into whether Avista Corp. affiliates may have engaged in questionable energy trading practices in Western energy markets turned up no evidence that the companies engaged in the buyback of ancillary services by submitting false schedules, participated in “megawatt laundering” or improperly executed so-called “counter-flow” schemes.

FERC staff and Avista on Jan. 30 filed an agreement at the Commission capping off an investigation by Commission staff into the power company’s behavior in western energy markets during 2000-2001. FERC staff found that there was no evidence that Avista Utilities or Avista Energy engaged in, or facilitated, any improper energy trading strategy or attempted to manipulate the western energy markets. Staff also said that there was no evidence that Avista Utilities or Avista Energy withheld relevant information from the Commission’s inquiry into the Western energy markets.

Avista Energy is Avista’s energy marketing and trading affiliate, while Avista Utilities is a company operating division that provides electric and natural gas service to customers in four western states.

FERC Chief Administrative Law Judge Curtis Wagner on April 9 said that he couldn’t certify the agreement to the full Commission because it appeared to conflict with the findings of a March 26 FERC staff report on price manipulation in western markets and an October 2002 California Independent System Operator (CAISO) report analyzing trading and scheduling strategies that were detailed in Enron Corp. memos.

Wagner noted allegations in the FERC staff report and the CAISO report related to possible misconduct in three areas: (i) “Ricochet” or “Megawatt Laundering”; (ii) the selling back of ancillary services (“Get Shorty”); and (iii) counter-flow revenues from cut schedules in real time.

“Based on additional analysis performed with respect to these issues, the supplemental report does not alter the conclusions set forth in trial staff’s initial report appended to the Jan. 30 agreement,” FERC staff said in a May 15 filing made at the agency. “As such, trial staff continues to believe that the settlement is a fair and reasonable resolution of the issues presented in this proceeding and supports certification of the Jan. 30 settlement…to the Commission for its approval.”

Addressing whether or not Avista Energy engaged in the “Get Shorty” trading strategy, FERC staff said that there was no evidence that suggests the company’s arbitraging operations in the ancillary services markets constituted violations of CAISO’s tariff. Also, staff said that Avista Energy’s arbitrage of ancillary services prices between the day ahead and hour ahead markets did not harm the market.

Trial staff found no evidence that Avista Energy improperly engaged in the buyback of ancillary services through the submission of false schedules. “Thus, the conclusions in trial staff’s initial report related to this issue remain unchanged.”

Similarly, trial staff did not unearth any evidence that Avista Energy improperly engaged in Ricochet or Megawatt Laundering, as defined by FERC staff in the March 26 price manipulation report. The report defined that strategy as involving “one entity buying energy from the Cal PX [California Power Exchange] in the day-ahead market and exporting it to a second entity which received a fee from the first company. The energy was later sold to the Cal ISO in the real market (or as an out of market sale).”

Among FERC trial staff’s findings is that CAISO’s database did not include any instances where Avista Utilities or Avista Energy engaged in any export/import combinations that met the criteria for Ricochet transactions.

Also, all combinations of day-ahead Cal PX exports and CAISO real-time imports at out of market prices shown in CAISO and Avista Energy databases occurred in the first week of December 2000 and one day in November 2000. “None of these combinations reflected a corresponding sleeving sale to a third party and, therefore, do not meet the criteria for Ricochet transactions defined in the final report,” FERC trial staff said. In addition, no evidence was uncovered that Avista Energy or Avista Utilities acted as a laundering agent for any party.

FERC staff also found no evidence that Avista Energy improperly incurred counter-flow revenues from cut schedules in real time. Commission staff noted that Avista Energy is listed among the 33 companies reported by CAISO as receiving counterflow congestion relief payments and subsequently failing to dispatch the committed energy. A FERC trial staff witness examined the instance attributed to Avista Energy and found that it related to a single day’s (one time occurrence) cut schedule in March 2001 and did not provide evidence of a pattern of behavior designed to game the congestion relief mechanisms of the CAISO tariff.

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