The Los Angeles Department of Water and Power (LADWP), Puget Sound Energy, PacifiCorp, Morgan Stanley Capital Group and Reliant Resources all have signed separate settlement agreements in recent days with FERC staff that dismiss allegations that they tried to game California’s electricity markets in 2000-2001.

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 Power Exchange (PX) more than two years ago. Violators would be required to return any profits stemming from the questionable activities. The suppliers cited in the order were directed to respond to the show cause actions by Sept. 2.

The show cause order said that Puget Sound Energy may have participated in gaming practices known as “false import,” “paper trading” and “cutting non-firm.” It found that PacifiCorp also may have engaged in false import, cutting non-firm and/or circular scheduling.

But, in separately filed settlement agreements, FERC staff moved to dismiss the gaming allegations made against Puget Sound Energy and PacifiCorp, as well as Morgan Stanley and Reliant Resources.

PacifiCorp agreed to pay $67,745 under the settlement, an amount equal to all of the gross revenues associated with “wheel out” gaming practice allegations made against the company. PacifiCorp “does not admit that the allegations set forth in the show cause order (pertaining to wheel out or otherwise) have any merit, or that during the relevant period in this proceeding any of PacifiCorp’s conduct violated any governing tariff, regulation, or statute or adversely affected the price formation process.”

Puget Sound Energy has agreed to pay $17,092 under its settlement. That figure represents total alleged revenue associated with the practice of cutting non-firm for the period Jan. 1, 2000 through June 20, 2001. “Payment of the settlement amount does not constitute an admission of any wrongdoing,” the settlement noted.

Meanwhile, the show cause order alleged that Morgan Stanley Capital Group may have engaged in the following gaming strategies: circular schedule, cut counterflow and scheduling power on a derated line. Morgan Stanley has agreed to pay $857,089 to settle the allegations. This figure breaks out to $633,415 in gross revenues attributable to Morgan Stanley for cutting non-firm schedules, and $223,674 in gross revenues attributable to Morgan Stanley under the circular schedules as estimated by FERC staff.

FERC staff said that it found no substantial evidence to support the charge that Morgan Stanley engaged in scheduling service on out-of-service lines, so Morgan Stanley will not be making any payments related to this allegation under the proposed settlement. As with the other settlements, Morgan Stanley is not making any admissions under the agreement that the allegations included in the show cause order have any merit.

FERC staff has also hammered out a settlement with Reliant Resources. The show cause order said that Reliant apparently engaged in false import, paper trading and double-selling. “The allegations that Reliant engaged in paper trading of ancillary services, ricochet or false import transactions or collusive gaming behavior have no foundation and therefore there is no cause of action to pursue against Reliant with respect to these allegations,” the settlement said.

Under the agreement, Reliant Resources will make a payment of $836,000. “The agreement and stipulation should not be deemed or construed as an admission or as evidence of wrongdoing or violation of any law or regulation by Reliant,” the settlement stated.

Meanwhile, the LADWP also received a clearance of blanket charges that it had illegally manipulated the market, but a spokesman for the state attorney general’s office disagreed the charges against LADWP should be dropped.

FERC lawyers last Friday filed a motion to dismiss allegation that LADWP used four trading strategies that violated FERC’s wholesale market rules, strategies similar to what has gotten Enron Corp.’s former traders in trouble with federal authorities.

“Given the evidence that [attorney general’s office] presented to FERC relative to LADWP’s involvement in the Enron gaming and the past history of FERC throughout this whole debacle, we have to have some reservations about the validity of this so-called exoneration,” Tom Dresslar, the attorney general’s spokesperson, said in a report in Saturday’s Los Angeles Times. He said late last week the state’s lawyers had not seen the motion by FERC’s attorneys.

A spokesperson for LADWP confirmed in the LA Times‘ report that the FERC lawyers were asking that the charges be dropped. The Los Angeles Mayor’s office and the head of LADWP issued statements saying the city and its utility were “proud” of their role in helping California during the 2000-2001 energy crisis, which is still reverberating statewide as part of the gubernatorial recall election set for next month.

LADWP officials said they submitted “tens of thousands of pages” of documents in several FERC hearings to deny the charges it has used tactics such as ricochet trading and phony congestion on the grid, along with allegedly overcharging for its excess wholesale supplies. The FERC lawyers did not rule on $20 million in LADWP alleged wholesale overcharges in the 2000-2001 period, although the city utility said is its still owed nearly $180 million in unpaid power bills at the now defunct California Power Exchange.

FERC staff has reached similar settlements in recent days with San Diego Gas & Electric Co., Aquila Merchant Services Inc., Portland General Electric and American Electric Power (see Daily GPI, Sept. 2).

Meanwhile, FERC staff has also recently filed motions to dismiss show cause proceedings against the following companies and power-related entities:

The difference between these motions to dismiss and the proposed settlements is that the motions were filed with the full Commission, while the settlement agreements have been filed with a FERC administrative law judge.

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