California’s Energy Refunds

Yesterday the state of California filed 3,000 pages with the Federal Energy Regulatory Commission to substantiate their claims for larger refunds from energy companies that provided power in the state during the electricity crisis in 2000-2001. The documents have been filed to support a claim for $7.5 billion in refunds, much more than the $1.8 billion that a FERC administrative judge suggested in December. Today Senator Dianne Feinstein and otherCalifornia officials have asked to make their FERC filing public.

And of course Governor Gray Davis continues his inflammatory rhetoric:

Gov. Gray Davis (D) said today’s filing was the first to provide to FERC significant evidence of widespread market manipulation not just by Enron, the energy trader now under bankruptcy court protection, but by most of independent electricity generators operating in the state, including Duke, Sempra, Dynergy, Reliant and AES/Williams. Some 70 companies are named in the filing, which remains under seal.

Davis said his investigators had found a mountain of evidence to prove the energy companies guilty of “stealing, cheating and lying” and “a massive coverup.”

“There’s not one smoking gun,” Davis said. “There’s an arsenal.”

Although they finally do acknowledge that municipal utilities behaved in the same way, with the same motives, as the “greedy, price-gouging, out-of-state generators”:

Moreover, the FERC filing alleges that even public municipal utilities serving Los Angeles, Anaheim, Glendale, Pasadena and Redding got into the game. Among the accusations: that public utilities colluded with the electricity traders in so-called “ricochet export-import games,” or “megawatt laundering,” whereby electricity was sold out of state at a cheaper price and then re-sold back to California just as demand and spot market prices reached their peak.

Enough already. Let it go. And admit that these firms were responding to incentives created through bad rules, policy failure, and continued finger pointing. As my friend Christine Tezak said in the Forbes article I quoted initially above,

Others said the case has dragged on long enough, especially at a time when the industry has been hit by credit downgrades and multimillion-dollar losses.

“The financial markets are pleading for resolution. When will it stop?” said Christine Tezak, an analyst with Schwab Capital Markets.