FERC orders generators justify or refund $55 million

The Federal Energy Regulatory Commission ordered six electric power generators to justify prices they charged for power sold in California in February or refund $55 million in profits the agency said could have been excessive. The order is the second in which FERC, acting under a Dec. 15 order allowing for after-the-fact review of wholesale power transactions, addressed charges generators have made windfall profits during California's energy crisis.

March 16, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Mar. 16�The Federal Energy Regulatory Commission ordered six electric power generators to justify prices they charged for power sold in California in February or refund $55 million in profits the agency said could have been excessive.

The order is the second in which FERC, acting under a Dec. 15 order allowing for after-the-fact review of wholesale power transactions, addressed charges generators have made windfall profits during California's energy crisis.

The agency Mar. 9 ordered 13 electric power generators to justify prices they charged for power sold in California in January or refund $69 million in profits.

Starting in January, FERC established a so-called $150/Mw-hr "soft cap" for electricity sales, under which all transactions bid above the cap were subject to weekly reporting and monitoring requirements.

The agency said it used a price screen or proxy market clearing price�which would be the marginal unit dispatched during a Stage 3 emergency�as the setting the market clearing price under conditions of tight supply.

Based on criteria which includes average natural gas prices, average nitrogen oxide allowance costs, and variable operation and maintenance costs, FERC determined $430/Mw-hr would be February's proxy clearing price. The agency said generators selling above the $430 clearing price must justify the charges, refund the excess amount, or offset the difference against money owed by the utilities for electricity purchases in February.

Named in the order and the amount owed were Dynegy Power Marketing Inc., a unit of Dynegy Inc. ($23.4 million); Williams Energy Services Inc., a unit of Williams, ($21.6 million); Reliant Energy Services Inc., a unit of Reliant Energy Inc. ($7.4 million); Duke Energy Trading & Marketing, a unit of Duke Energy Corp. ($2.1 million); Mirant Corp. ($826,111); and Portland General Electric Co., a unit of Enron Corp. ($73,000).

Reliant spokesman Richard Wheatley said the company will provide the agency supplementary data and is "confidant that FERC will find our sales prices justified by the costs." He said the amount of power sales that FERC found questionable is only a very small percentage of the total power bill for February.

The commission said it will set a proxy clearing price through April. Thursday FERC Chairman Curtis Hebert told a congressional committee the agency is also examining December transactions.

He said the commission hopes to have a market monitoring program in place by May so post-transaction refunds will not have to be ordered.