California group threatens legal action over direct access end

California's Alliance for Retail Energy Markets Wednesday threatened legal action if state regulators retroactively suspend retail choice, effectively abrogating existing contracts. The organization made up of nonutility marketers said it will seek 'immediate injunctive relief' to prevent application of any action by the California Public Utilities Commission that would retroactively end direct access effective July 1.

HOUSTON, Aug. 29 -- California's Alliance for Retail Energy Markets Wednesday threatened legal action if state regulators retroactively suspend retail choice, effectively abrogating existing contracts.

The organization made up of nonutility marketers said it will seek "immediate injunctive relief" to prevent application of any action by the California Public Utilities Commission that would retroactively end direct access effective July 1.

Such action would constitute a significant economic burden on existing contracts, violating both the contracts clause and the takings clause of the US Constitution, the organization said. The alliance said members have crafted legislative language that would ensure some consumers can continue to receive power from a nonutility source without endangering the sale of energy revenue bonds to repay the California general fund.

The state has spent billions of dollars on electricity and is planning a bond issue to recoup its expenses. Regulators fear the bond issue could be jeopardized if revenue from large electricity consumers isn't available to help retire the debt.

In a statement, the organization said it urged the PUC to consider the filing, submitted jointly by the alliance and the Western Power Trading Forum to the PUC, which provides a blueprint for "workable direct access in the future" and is supported by numerous filing participants. "We remain willing to work with all parties to craft legislative and regulatory decisions that meet both of these goals," it said.

The alliance said it also took issue with a PUC statement that its June 15 draft decision served as adequate notice to market participants that direct access would be suspended effective July 1. Noting the PUC postponed action on that draft order and has since issued two additional draft decisions, the organization said it is difficult to know "which of its draft decisions the PUC takes most seriously."

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