Williams unit to refund $8 million under proposed FERC agreement

By the OGJ Online Staff

HOUSTON, May 1 -- A unit of Tulsa-based Williams has agreed to refund $8 million and to provide replacement service if plants contracted to the California Independent System Operator are unavailable because of forced outages, under a proposed consent agreement with the Federal Energy Regulatory Commission.

The agreement must be approved by commissioners. Williams and AES did not admit to any violation or wrongdoing and the commission has not concluded Williams or AES engaged in market power abuses.

Federal regulators Mar. 14 accused units of Williams and AES Corp. of withholding electricity from two California power plants during April-May 2000 and running more profitable plants instead.

FERC ordered Williams Energy Marketing & Trading Co. and AES Southland to explain why they shouldn't return $10 million in profits from an alleged scheme to withhold power from units under contract to supply electricity when called upon by the ISO.

Williams has a tolling agreement with AES which owns and operates the plants in question. Williams markets the power from the Alamitos 4 and Huntington Beach 2 plants designated so-called "reliability must run" (RMR) plants by the ISO. Williams has a right to dispatch any unit as long as AES says it's available for service. AES pays operation and maintenance costs. The two companies are supposed to coordinate timing of outages, according to the tolling agreement.

During April and May, the ISO tried to dispatch units designated RMR but was told they were unavailable, according to the commission order. The ISO was forced to dispatch other more expensive units, FERC alleged. The order indicated Williams received $10.85 million in additional revenue after costs, and including interest, as a result of the unavailability of the designated RMR units.

Under the proposed agreement, Williams agreed to bear the financial risk of designated RMR unit outages for 1 year. If an RMR unit at Alamitos or Huntington Beach is unavailable due to a forced outage, the ISO may call a non-RMR unit at either plant to provide replacement service for the same price that the ISO would have paid Williams had the designated RMR unit been available.

Williams agreed to credit $8 million to outstanding invoices owed it by the ISO. The company also has taken action to insure no employee will make any statement to AES Southland that could be interpreted as "inappropriately" attempting to influence facility operations, according to the proposed agreement.