Without admitting its actions influenced prices in California’s power market, Reliant Resources Inc. and several of its California power generation facilities have entered into a stipulation and consent agreement with FERC 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 Friday, resolves 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 (Cal-PX) apparently in an attempt to ratchet up forward prices for electricity [PA02-2-001].
“We decided that the prices were too low on the daily market so we shut down,” said one Reliant trader in a statement. “Everybody thought it was really exciting that we were gonna play some market power,” remarked another trader.
The settlement “in no way affects findings or remedies for other days or other activities” by Reliant, according to the Federal Energy Regulatory Commission order approving the agreement. Moreover, the $13.8 million amount is in addition to any potential refunds that the Houston-based company may owe as a result of FERC’s year-long probe of prices for power and natural gas in California.
The agency said the energy company’s payment of $13.8 million “reflects the worst-case scenario of the effect of Reliant’s withholding on the California market.” Reliant has been ordered to pay the amount within 15 days of receiving the necessary information from the Cal-PX. FERC directed the Cal-PX to furnish Reliant with the data within seven days.
Reliant notified FERC in late 2002 about the withholding actions of its employees in California, the agreement said. “Reliant has fully cooperated with staff in this investigation has consented to the agreement,” the agency noted.
The settlement stems from the Commission’s investigation of market manipulation in California, which the agency said it expects to complete in the first quarter of this year. In a concurring opinion, Commissioner William Massey said he was concerned that FERC was reviewing the Reliant settlement in a “vacuum.”
“I expect staff to report to us in the near future the results of the fact-finding investigation…into potential manipulation of electric and natural gas prices…Thus, I am concerned that we are entering this agreement without the benefit of the more complete record that will soon be available, and would prefer that we address Reliant’s behavior in a more open context,” he noted.
In addition to the monetary settlement, Reliant has agreed to submit bids for all uncommitted, available capacity from its California plants into the day-ahead market or the Cal-ISO ancillary services and/or real-time markets for “one additional year following termination of the existing must-offer obligation or until Dec. 31, 2006, whichever is later.”
For the next two years, Reliant also is required to hire an independent engineering company to perform semi-annual audits of outages at its California generating facilities to determine that the outages are legitimate.
In agreeing to the settlement, “Reliant neither admits nor denies that its actions affected prices in any market, or violated the [Federal Power Act], its own market-based rate tariffs, the tariffs of the Cal-PX or Cal-ISO or any other law or regulation.”
Massey said he would have preferred that FERC also limit Reliant’s ability to sell power from its California generators at market-based prices, saying this would be an “appropriate deterrent for the type of egregious conduct Reliant engaged in.”
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