California Ordered to Refund Enron $270M

Wednesday, June 16th 2004, 9:04 am

By: News On 6

SACRAMENTO, Calif. (AP) _ As California struggled through the 2000-2001 energy crisis, Enron traders gloated about gouging the state. Now state Attorney General Bill Lockyer says federal regulators are heaping insult upon injury by demanding California pay Enron and other energy companies almost $270 million in refunds.

In a motion filed with the Federal Energy Regulatory Commission, Lockyer said the refunds would reward ``the sellers a second time for their market manipulation activities and predatory pricing.''

The order was particularly unfair considering recent evidence of market manipulation by energy generators, Lockyer said in an interview Tuesday.

Transcripts have been released of Enron Corp. traders openly and gleefully discussing creating congestion on transmission lines, taking power plants off-line to pump up electricity prices and other manipulation of the California power market.

But FERC has ordered refunds and is calculating how much power companies owe in overcharges from the energy crisis. At issue are megawatts bought and sold through the Independent System Operator, the manager of the state's power grid.

The May order makes it clear that the agency's refund order includes $2.9 billion worth of electricity purchases made by California energy traders in 2001, when the state stepped in to buy power on behalf of three nearly bankrupt utilities.

In his filing on Monday, Lockyer said the state's power buys helped the ISO secure enough energy to keep the lights on. State buyers bought power at the high market price, then resold it at the state's cost ``in order to protect California's electricity grid from blackouts.''

Most of the state's electricity purchases were used by Pacific Gas and Electric Co., Southern California Edison and San Diego Gas & Electric Co.

But some of the power sold into the ISO market was bought by other energy companies, such as Enron. Those are the sales subject to the refund order.

FERC spokesman Bryan Lee said he couldn't comment because the matter was pending before the commission. But in its order, FERC said the state's power trades should be treated the same as other wholesalers.

Because the state bought a lot of power, it will be entitled to refunds nearly equal to what it has to pay in refunds, FERC said.

Gary Ackerman, executive director of the Western Power Trading Forum, said the state was acting as an energy company when it sold power to the ISO, so it should be held to the same rules.

Because the spot market price was ruled too high, FERC set a new benchmark for what power should have cost.

``Any seller who sold at prices above the benchmark will have to refund the difference,'' said Ackerman, whose group represents electricity sellers. ``No one is exempt.''

The refunds California could have to pay would go to a variety of energy traders and wholesalers, including: $23 million to Enron; Reliant Energy, $33.7 million; Williams, $25 million; Dynegy, $16.1 million; Mirant, $26.7 million; and $33.2 million to Duke.

Enron spokeswoman Karen Denne said the energy company's lawyers hadn't seen Lockyer's motion and any response would be filed with FERC.