Federal order targets California Power Exchange

A California federal judge temporarily stayed the California Power Exchange from attempting to collect the unpaid debts of two California utilities from Enron Corp. and Avista Energy Inc. and scheduled a hearing Thursday. US District Judge Carlos Moreno will consider extending the order to all market participants and enjoining the PX from issuing chargeback invoices to them, declaring them in default, and drawing down letters of credit held as collateral.


By the OGJ Online Staff

HOUSTON, Feb. 13�A California federal judge temporarily stayed the California Power Exchange from attempting to collect the unpaid debts of two California utilities from Enron Corp. and Avista Energy Inc. and scheduled a hearing Thursday.

The Federal Energy Regulatory Commission (FERC) Monday called for comments on a similar complaint and set a Feb. 28 deadline. The nine companies filing the FERC complaint asked the agency for an immediate standstill and suspension of the so-called chargeback mechanism by Thursday.

US District Judge Carlos Moreno determined Enron and Avista were in immediate danger of suffering "irreparable injury" and harm to the companies outweighed any harm to the legitimate interests of the PX.

The Thursday hearing will take up whether $36.5 million drawn from Enron's letters of credit Jan. 31 by the PX and any future withdrawals should be held in escrow accounts. Moreno will also consider extending the order to all market participants and enjoining the PX from issuing chargeback invoices to them, declaring them in default, and drawing down letters of credit held as collateral.

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, says Jesus Arredondo, a PX spokesman. In their FERC filing, the companies say the PX is misinterpreting its own credit and default provisions.

When the provision was under discussion, the concern of all, including Pacific Gas & Electric (PGE), a unit of PG&E Corp., and Southern California Edison (SCE), a unit of Edison International, was directed toward default resulting from "failures to deliver power, not failures by the utilities to pay for it," the companies say in their petition. The companies allege the PX has no authority to force market participants to cover for payment defaults by SCE and PGE.

The PX has already sent a bill for $214 million and, as bill collector for the ISO, planned to send out payment demands this week. The PX suspended operations in mid-January and is scheduled to permanently close in March because of the crisis in California energy markets and overhaul of the deregulated system. Under the California restructuring law, utilities were required to buy power marketed through the PX.

Under the tariff, if a power exchange 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.

Not only was the PX planning to use the mechanism to collect its own outstanding bills, it also intended to collect unpaid bills owed the ISO by the utilities. Both SCE and PGE have refused to pay their ISO bills for November which exceed $1 billion.

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