California judges demur to FERC; order power sales

A California federal judge Tuesday halted the California Power Exchange (PX) from collecting the unpaid debts of two California utilities from Enron Corp. and Avista Energy Inc. until federal regulators rules on the issue. Separately, US District Court Judge Frank Damrell extended to Feb. 23 an order requiring subsidiaries of Reliant Energy Inc. Williams, AES Corp., and Dynegy Inc. to sell power to the California Independent System Operator (ISO) without getting paid for it.


By the OGJ Online Staff

HOUSTON, Feb. 21�A California federal judge Tuesday halted the California Power Exchange (PX) from collecting the unpaid debts of two California utilities from Enron Corp. and Avista Energy Inc. until federal regulators rules on the issue.

Separately, US District Court Judge Frank Damrell extended to Feb. 23 an order requiring subsidiaries of Reliant Energy Inc. Williams, AES Corp., and Dynegy Inc. to sell power to the California Independent System Operator (ISO) without getting paid for it. Damrell's original temporary restraining order, issued Feb. 6, applied only to Reliant, but the other suppliers have agreed to abide by its terms.

The Federal Energy Regulatory Commission (FERC) has set a Feb. 28 deadline for comments on complaints filed by nine companies asking for suspension of the California PX's so-called "charge back" mechanism. In issuing a permanent injunction Tuesday, US District Judge Carlos Moreno said it was important for the court to maintain the status quo and allow FERC to determine the allocation of funds.

On Feb. 8 eight electricity marketers, including Enron and Avista, and one purchaser in a FERC filing said they should not be liable for Southern California Edison Co. and Pacific Gas & Electric Co.'s billion-dollar debt to the PX and the California Independent System Operator (ISO).

The PX argued its tariff permits the exchange to assess market participants for uncollected receivables, no matter who actually owes the money. In their FERC filing, the companies say the PX is misinterpreting its own credit and default provisions.

The charge back would have occurred under a mechanism under which defaults by PX debtors are proportionally charged back to creditors based on creditors' levels of participation in the exchange 3 months prior to the default. Under its interpretation, the PX withdrew $36.5 million from Enron's letters of credit Jan. 31.

The California PX initially took the position if a participant refuses to pay another participant's unpaid bills, then that default is also charged back to the remaining participants in what the FERC petition terms a �death spiral.� Such a mechanism means no matter how reasonable or prudent a market participant, it could be held liable for the defaults of others over which it has no control, according to the petition.

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