Tucson Electric files FERC complaint against California governor

Ann de Rouffignac
OGJ Online

HOUSTON, Feb. 28�In a first, Tucson Electric Power Co. asked federal regulators to force California authorities to make good on payments owed for 186,915 Mw-hr of electricity delivered by the Arizona utility for which it has not been fully compensated.

Antoine Cobb, attorney for Tucson Electric, would not reveal the amount of money owed the company other than to say it is �substantial.�

In a complaint filed Tuesday with the Federal Energy Regulatory Commission (FERC), Tucson Electric alleged California Gov. Gray Davis violated the Federal Powers Act by seizing contracts held by the California Power Exchange (PX) as collateral.

The two largest California utilities submitted the contracts to the PX as collateral in the event of default. After they failed to make scheduled payments, the PX began the process of liquidating the long-term power to pay generators. Davis �commandeered� the contracts Jan. 31. A spokesman for the exchange said it received bids for $651 million for Southern California Edison Co.�s contracts and $342 million for Pacific Gas & Electric Co.�s contracts, before the governor acted.

Tucson Electric participated in the wholesale power markets in California and was not paid in full for the sale of 182,395 Mw-hr to the PX and 4,520 Mw-hr sold to the California Independent System Operator (ISO), according to the complaint.

The sales occurred since October 2000. Tucson Electric said in the complaint that neither the governor nor the PX sought prior approval from the commission under the Federal Powers Act for the transfer of the contracts. While other companies are in the same boat and have sought relief through the courts, Tucson Electric is the first to seek relief from FERC under its oversight of PX tariff rates.

Tucson Electric asked FERC void the unconditional transfer of the contracts and place conditions on any transfer that would ensure no adverse impact on rates, regulation, or competition.

"To ensure that the PX, PG&E, and Edison [parent of Southern California Edison] have clear direction regarding the applicable rate that must be charged and paid, this commission should order the PX to collect the duly filed rate from PG&E and Edison and to remit such proceeds to Tucson Electric and other sellers of wholesale power," Tucson Electric said in its petition.

The utility said any amount less than the lawful rate on file with the commission amounts to a �unilateral and illegal� change to the PX�s filed rate.

Further, the company said Davis showed no regard for the potential adverse impact of the seizure on Tucson Electric, its ratepayers, or on other out-of-state market participants.

�The governor sacrificed the larger public interest based on his assessment of what is in the best interest of only one group of stakeholders�California�s retail ratepayers. The commission must take a broader view and balance needs of all market participants including out-of-state utilities selling excess power,� the complaint stated.

Duke Energy Corp. also sued Gov. Davis and the state in US District Court in Los Angeles over the same issue last month. This week Duke suspended until April 30 its lawsuit because it signed a contract to sell wholesale power to the California Department of Water Resources that would guarantee payment.

If progress on the payment for past power purchases is not satisfactory, the suit will be reactivated, a spokesman said.

On Jan. 18, Southern California Edison defaulted on $214.5 million invoice for PX transactions for Oct. 2000. On Jan. 29, Pacific Gas & Electric defaulted on $611 million to the California ISO for real time power bought mid-November to mid-December. On Feb. 1, Edison failed to pay the PX for another $34 million of power purchased by the ISO.

The utility requests FERC for fast track processing to reduce the number of days allowed for comment. FERC hasn't responded to the complaint yet.