Federal judge lifts Reliant order; FERC to hear case

By the OGJ Online Staff

HOUSTON, Feb. 23, 2001—Reliant Energy Inc. Friday agreed to “temporarily” honor electricity dispatch requests from the California Independent System Operator (ISO), while the ISO’s ability to force deliveries without compensation is litigated before the Federal Energy Regulatory Commission.

Under a stipulated agreement between the ISO and Reliant, U.S. District Judge Frank Damrell in Sacramento allowed a temporary restraining order against Reliant and other generators to expire Friday and suspended action on a preliminary injunction sought by the ISO.

In a statement, Reliant called its recently signed deal with the California Department of Resources (DWR) only a “temporary payment mechanism” for sales of electricity to the ISO, including out-of-market calls. “Stop-gap measures, such as the short-term agreement with the DWR should not obscure the fact that the over-arching issues surrounding the lack of creditworthiness of the ISO must still be resolved to bring stability to the California energy marketplace.”

Thursday, California’s biggest generators, including Reliant, asked the Federal Energy Regulatory Commission (FERC) to enforce a Feb. 14 order that would relieve them from a requirement to sell electricity to the ISO without compensation. Duke Energy Corp., Dynegy Inc., Mirant Corp., Reliant Energy, and Williams filed a request for an emergency order that would compel the ISO to comply with the FERC order.

The Feb. 14 FERC order said the ISO could not relax creditworthiness provisions of its tariffs, if the change shifts an “unacceptable financial risk” to third party suppliers. The ISO proposed an amendment to its tariff, effectively relaxing creditworthiness requirements imposed on financially strapped California utilities as buyers of power. FERC rejected that amendment.

“Less than 24 hours after the issuance of the Feb. 14 order, the ISO announced that it had no intention of complying with the commission’s decision,” according to the FERC filing. It says the ISO has conducted “business as usual.”

The ISO interpreted FERC’s Feb. 14 order to mean the credit standards only applied to forward market transactions or prescheduled transactions. All other transactions, including real-time and emergency dispatch orders to provide power, were not subject to credit conditions of the ISO tariff, under the grid operator’s interpretation.

The ISO buys electricity from generators in the day-ahead and real-time markets and provides it to the utilities which are supposed to guarantee payment for the power. But Southern California Edison Co., a unit of Edison International, and Pacific Gas & Electric Co., a unit of PG&E Corp., are near bankrupt and have ceased paying for power purchased on their behalf since mid-January.

When the generators balked at continuing to sell power because of the high risk of not being compensated for it, the ISO sued the generators in federal court in Sacramento to force them to continue selling power to the utilities. Under Damrell’s order, the generators have been forced to continue delivering power to the ISO.