If FERC ultimately finds in favor of various power suppliers in a dispute over whether refunds should be ordered as a result of dysfunctional power prices in the Pacific Northwest in 2000-2001, such a decision would have a “devastating impact” on the credibility of both the federal agency and its staff, an attorney representing the City of Seattle said last Monday.

“It is important, I think, at the outset to reflect for a moment on this Commission’s statutory responsibility, which is to protect wholesale power purchasers and their customers,” said Philip Nowak, who gave an oral argument to FERC on Monday on behalf of Seattle.

The Commission is charged with assuring, in the first instance, that all wholesale prices are just and reasonable, Nowak noted. “To the extent the Commission finds that prices are unjust and unreasonable, it is charged with determining the just and reasonable prices.”

Nowak said that participation and investor confidence in energy markets “has been, and will continue to be, dependent upon the Commission’s willingness to vigorously carry out its statutory responsibility to ensure the integrity of the energy markets.”

The Seattle attorney asked FERC Commissioners to consider what the impact would be were it to allow Enron Corp. and other power marketers and their shareholders “to retain the profits they made from speculative sales in markets that this Commission has found dysfunctional and in markets that the staff of this Commission has found were massively manipulated and otherwise unduly influenced.”

Nowak argued that such a decision would have a “devastating impact” on the credibility of FERC and its staff. “It would signal this Commission’s abdication of its statutory responsibility to ensure that wholesale energy markets are competitive and that prices in those markets are just and reasonable.”

Such a ruling would also “signal this Commission’s abdication of its statutory responsibility to protect power purchasers and their customers by failing to assure that they received the relief to which they are entitled under the Federal Power Act,” the attorney asserted.

In September 2001, FERC ALJ Carmen Cintron recommended against refunds for the region, ruling that power prices in the Pacific Northwest were not “unjust and unreasonable,” and that the market was competitive. Cintron recommended that the proceeding be terminated by FERC’s affirming a previous dismissal of a Puget Sound Energy Inc. complaint and allowing the utility to withdraw its rehearing request.

However, in response to separate pleas by the cities of Tacoma, Seattle and the public utility district of Grays Harbor, the Commission in December 2002 gave parties until Feb. 28, 2003 to file additional evidence supporting claims for refunds on electricity overcharges in the Pacific Northwest during the period of Jan. 1, 2000 through June 20, 2001.

More recently, a large group of power companies known collectively as the “Transaction Finality Group” (TFG) last month urged FERC to hold oral arguments in the proceeding.

“Any action that the Commission takes regarding the electricity market prices in the Pacific Northwest during 2000 and 2001 will retroactively disturb thousands of completed and long-settled bilateral contracts,” the group of power companies argued in a May 6 filing. “The extraordinary significance of the decisions facing the Commission warrants the presentation of oral arguments before the Commission itself.”

Gary Bachman, an attorney representing certain TFG members, pointed out at Monday’s oral arguments that the TFG “includes the vast majority of the load served in the Pacific Northwest.” Also, Bachman said that the Bonneville Power Administration has opposed refunds in this proceeding.

He said that members of the TFG “are unified in our opposition to any order imposing retroactive refunds. We believe any such remedy in this proceeding would be legally flawed and grossly inequitable.”

Members of TFG include, among others: Puget Sound Energy; Morgan Stanley Capital Group; Duke Energy Trading & Marketing; Powerex Corp.; Avista Corp; Pinnacle West Capital Corp.; Arizona Public Service Co.; Constellation Power Source; and Portland General Electric Co.

Bachman outlined for FERC Commissioners what he said are “two fatal flaws” warranting termination of the Pacific Northwest proceeding at the agency.

“The first fatal flaw…is that no refund effective date was ever set by this Commission and the notice obligation and the plain language” of a key section of the Federal Power Act “precludes the Commission from setting them retroactively,” Bachman said.

The second fatal flaw to the current proceeding is the fact that Puget Sound Energy has withdrawn its complaint related to the proceeding, Bachman said. Under FERC rules, withdrawal of the complaint became effective as a matter of law on July 9, 2001, he noted.

“There’s no complaint and because Puget was the only party to EL01-10 [the proceeding’s docket number] to seek rehearing, the decision of the Commission to dismiss the complaint — that decision is final,” Bachman argued.

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