California complains that FERC stripped billions from potential refunds

By the OGJ Online Staff

HOUSTON, Aug. 1, 2001 — California complained federal regulators removed billions of dollars from potential refunds owed the state by ordering use of a flawed formula to calculate the amount.

California has alleged generators overcharged the state and its consumers billions by selling electricity at "unjust and unreasonable" prices.

The state Electricity Oversight Board (EOB) Tuesday asked the Federal Energy Regulatory Commission for a rehearing of the commission's July 25 order setting out the method to calculate refunds. The formula will be used to calculate a "refund proxy price" that would be compared with actual prices. The difference would constitute the refunds.

California has argued from the start that generators overcharged consumers by almost $9 billion from May 2000 through March 2001. The commission first ordered the dates of the refund period to be October 2000 through March 2001, lopping off about $2 billion of potential refunds, state officials said. The July 25 order then shaved off another $2 billion, according to the filing.

At best, the state would receive only $5 billion, but a FERC administrative judge is on record estimating the refund should to be closer to $1 billion.

The EOB complained the methodology FERC used incorrectly excludes all purchases made by the California Department of Water Resources (DWR) in the bilateral spot market. The board said the commission and the power sellers forced the DWR into the spot market after the California Power Exchange was eliminated, and sellers declined to do business with the California Independent System Operator because of credit issues.

The commission also imposed a 10% credit risk premium on top of the refund proxy price, thus narrowing any difference between the refund price and actual prices a step further.

Transfer of wealth
The state argued the July 25 order imposes interest on what is owed the generators. The state still owes generators billions of dollars for power they delivered but haven't received payment. The interest will compensate for overdue payments, the state said. "Adding an additional 10% is simply a gift and further increases the transfer of wealth from consumers to generators," the state said.

California criticized the commission's method of calculating the market-clearing prices for refund purposes based on the heat rate of the last generating unit actually dispatched. The state claimed generators withheld more efficient units, driving up prices.

The state argued FERC should use heat rates of all available units, barring notice of a forced or scheduled outage. Finally, California said actual gas prices should be used to determine the proxy price, not spot gas prices.

There is no evidence, the state said, generators supplied their power plants solely with fuel bought on the spot market. In fact, the state argued, it is highly unlikely that a company would rely solely on the spot market for gas.

"Use of actual cost data is accurate and favors no set of interests," the state said. Hearings continue on the refund case at FERC this month.

Sponsored by FLSmidth
Recommend this article Recommend this article () You recommended this article You recommended this article ()
Follow Power Engineering on Twitter

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Current Magazine Issue

Volume 117, Issue 8

Power Industry Wire News

Algae Biomass Summit Launches White House Petition to Encourage EPA to Approve CO2 Recycling as Emissions Reduction Strategy

Algae Biomass Summit Launches White House Petition to Encourage EPA to Approve CO2 Recy...

MicroSeismic, Inc. and PanAmerican Geoservices Limited Announce Exclusive Partnership

MicroSeismic, Inc. and PanAmerican Geoservices Limited Announce Exclusive Partnership

TRC Acquires NOVA Safety & Environmental

TRC Acquires NOVA Safety & Environmental

Building Turbines Update on Status, Patent's and Current Investments

Building Turbines Update on Status, Patent's and Current Investments

Energistics Publishes RESQML V2.0 Standard

Energistics Publishes RESQML V2.0 Standard

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>