FERC will hear oral arguments this Wednesday related to bids by Nevada Power Co., Sierra Pacific Power Co. and two other western-based power entities to reform several power contracts they entered into with power suppliers during the height of the 2000-2001 western energy crisis, the Commission said last week.

FERC Administrative Law Judge Carmen Cintron in December dismissed a series of complaints brought by Nevada Power, Sierra Pacific Power, Southern California Water Co. and the Snohomish Public Utility District in Washington against several power suppliers, saying that they failed to show that the contract rates in question adversely affected the public interest as required under the Mobile-Sierra doctrine.

Power suppliers targeted in the complaints include: Enron Power Marketing, El Paso Merchant Energy, American Electric Power Services Corp. and several others.

The complaints alleged that dysfunctions in western power markets in late 2000 and early 2001 tainted prices for sale into forward markets, making the rates in the challenged contracts “unjust and reasonable” because they were higher than forward market prices after mid-2001. But Cintron pointed out that proving the high-priced contracts were “unjust and reasonable” was not enough. Nevada Power and others had to show the contracts ran afoul of the higher public interest standard.

FERC’s efforts to come to a decision on the challenged contracts is part of a broader push by the agency to wrap up several interrelated proceedings stemming from the energy crisis that engulfed California and other western states in 2000-2001. At its March 26 agenda meeting, Commission staff issued a long-awaited report detailing the results of a lengthy probe into alleged manipulation of electricity and natural gas markets in the region. Staff also recommended that FERC use a proxy gas price to compute power refunds for California customers rather than use actual delivered gas prices during that period.

While FERC’s three commissioners discussed the challenged power contracts at the March 26 meeting, no formal action was taken in the pending cases. Earlier this month, a group of U.S. senators from several western states asked FERC to hold oral arguments on forward contract refund cases pending before the Commission to clear the air on whether a “just and reasonable” standard or the higher Mobile-Sierra “public interest” standard should be applied in the review of those contracts.

Meanwhile, Southern California Water and Snohomish recently asserted 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 the pending challenges to the power contracts.

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