Energy commission expects jump in California energy refunds


March 27, 2003 -- The Federal Energy Regulatory Commission took action Wednesday that it expects will increase the amount of refunds in connection with California's energy crisis of 2000 and 2001.

The refunds would cover the period from October 2, 2000, through June 20, 2001.

Chairman Pat Wood, III commented: "This Commission is acting to ensure that customers pay just and reasonable prices. Today's actions represent important progress toward a just resolution of these matters for both customers and the industry. It is time to bring this crisis to a close."

The increase, yet to be calculated, is expected to be greater than the $1.8 billion total estimated by a FERC administrative law judge last December. The Commission's refund order adopts most of the presiding judge's findings.

The Commission embraced a staff recommendation that a different set of gas prices be used to calculate refunds. The new pricing methodology, based on gas prices for producing basins plus transportation, was largely explained in Staff's Initial Report released in August 2002, and was finalized in a final staff report on western markets issued March 26 (Docket No. PA02-2-000).

It would eliminate distortions in gas index prices caused by manipulation in the southern California market. The Commission also adopts a staff recommendation to ensure that generators recover their spot gas costs over the refund period.

Because the gas price proxy values will be lower than the index prices used by the judge in the refund case, estimated energy costs will be smaller and refunds will be larger.

The Commission said the new gas price proxy strikes a balance between protecting customers from prices based on manipulation and dysfunction, and protecting suppliers' incentives to compete in the California energy market.

The new method determines the Mitigated Market Clearing Price (MMCP) using a formula based on the generator's incremental heat rate multiplied by the producing-area gas price index plus an allowance for transportation costs. The producer area index plus transportation allowance to California serves as a proxy for competitively derived gas prices in California.

To the degree that generators paid more for gas, the cost of that gas will be taken out of the refund calculation. However, the Commission indicated that it will defer until after the 30-day period allowed for rehearing of Wednesday's order the requirement for the California Independent System Operator (CAISO) and the California Power Exchange to calculate revised MMCPs and refunds using the new gas price proxy.

Thus, the total size of the refund will not be known for several more weeks. Administrative Law Judge Bruce L. Birchman calculated that refunds from generators and marketers should equal $1.8 billion.

However, because suppliers to the CAISO and PX were still owed $3 billion for unpaid energy, California's utilities still owed a net $1.2 billion after the refunds period. The $1.8 billion refund the judge calculated offset by nearly two-thirds the outstanding amount owed.

To reach these findings, the judge followed the Commission's instructions in using daily gas prices from three publications for California delivery points. This linked refunds to manipulated gas index prices, which staff has now shown to be inappropriate for purposes of calculating refunds in this proceeding.

The Commission for the most part adopted the judge's other findings, which are not affected by a change in the gas price used to calculate refunds. The staff report provides extensive information on various techniques of alleged market manipulation employed by entities in the western electric and natural gas markets.

The report also contains information on spot market transactions data that is compared to the underlying cost inputs.

For more information, visit www.ferc.gov.



Sponsored by FLSmidth

Related Articles

Top 10 most read articles from 2014

We take a look back at the stories that you, the reader, read the most this year.

Day & Zimmermann land maintenance contract at Palo Verde Nuclear Generation Station

Day & Zimmermann (D&Z)'s Engineering, Construction & Maintenance group has been awarded a three-year contract by Arizona Public Service Co. (APS) to provide maintenance services at the 3,739-MW Palo Verde Nuclear Generation Station near Phoenix. 

Follow Power Engineering on Twitter

Latest News

EPA permit paves way for $500M power plant in South Texas

Federal regulators have issued a permit that paves the way for construction of a $500 million...
Renewable Integration

Power Engineering Photo of the Day

Wärtsilä to deliver natural gas engines to Montana-Dakota Utilities

Wärtsilä will supply a 19-MW Smart Power Generation power plant to Montana-Dakota Utilities (...

Clyde Bergemann to supply emissions control equipment to Polish cogeneration power plant

The Clyde Bergemann Power Group Europe has received at $10 million contract, from SBB Energy,...

Inslee's cap-and-trade plan makes polluters pay

Gov. Jay Inslee's sweeping proposal to rein in greenhouse gases with a charge on polluters is...
Vattenfall Ringhals nuclear power plant Sweden government SSM phase out

Vattenfall may end plans for new nuclear power at Ringhals

Swedish utility Vattenfall may end plans for a new nuclear power plant at the Ringhals power ...

India nuke deals still thorny for US despite 'breakthrough'

India and America's declaration of a breakthrough in contentious nuclear energy cooperation h...

W.Va. bill requires lawmakers to OK state carbon plan

A West Virginia Senate panel is considering requiring lawmakers to approve state plans to com...

Power Engineering Current Issue

01/01/2015
Volume 119, Issue 1
1501pe-cover-lg

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.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015

Buyers Guide Company Listings

Power Industry Wire News

Espey Receives Award for Design and Development of Power Supplies in Support of the Range Radar Replacement Program

Espey Receives Award for Design and Development of Power Supplies in Support of the Ran...

3DIcon to Attend SPIE DSS 2015 Conference

3DIcon to Attend SPIE DSS 2015 Conference

Nameplates For Industry's Graphic Overlays Simplify Private Labeling

Nameplates For Industry's Graphic Overlays Simplify Private Labeling

ESCO Pipe Beveling Tool Features I.D. Tracker for Pipe up to 36" Dia.

ESCO Pipe Beveling Tool Features I.D. Tracker for Pipe up to 36" Dia.

Bridge Bank Provides Perpetual Energy Systems $28 Million to Refinance 12.25 Mega Watts of Solar Energy in Northern and Southern California

Bridge Bank Provides Perpetual Energy Systems $28 Million to Refinance 12.25 Mega Watts...

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 >>