Appeals court strikes down energy refunds

"This ruling does not mean that these entities did not rip us off," said Tom Dresslar, spokesman for Attorney General Bill Lockyer. "What it means is they can escape accountability for their actions."

The 9th U.S. Circuit Court of Appeals said the Federal Energy Regulatory Commission lacks authority over the government-run utilities California was targeting for reimbursement. Those include the Oregon-based Bonneville Power Administration, the Los Angeles Department of Water and Power and several others.

State and federal officials couldn't say how much the regulatory commission would have ordered in refunds from those utilities, but California's attorney general estimated it could have reached $1 billion.

"Clearly, it will limit the scope of refunds the commission will order in the California refund case," FERC spokesman Bryan Lee said.

The regulatory commission has said the amount due California in refunds is far less than the state is seeking, about $3 billion. But that amount will be lower now that the court has exempted government-run utilities - perhaps down to $2 billion.

The commission based its figure on the amount it estimated was overcharged on sales of electricity after October 2000. That was during the height of the state's energy crisis, when wholesale prices soared.

The state is still seeking refunds for sales made before October 2000 and sales made directly to state energy buyers, which the regulatory commission has said it will not address. The $1 billion estimate of how much the government-run utilities owe California includes those contested sales, Dresslar said.

The appellate court said the regulatory commission's refund authority under the Federal Power Act excluded municipal and other government-owned utilities. In reaching its conclusion, the three-judge panel said it was "not unmindful of the impact our decision may have on the overall refunds claimed by California ratepayers."

But the court said the language of the Federal Power Act was clear in excluding governmental agencies from FERC's refund authority. That language was changed in the massive energy bill signed by President Bush in August, Lee said.

The Bonneville Power Administration, which provides about half of the power in the Pacific Northwest, estimated it owed about $48 million under the formula, spokesman Ed Mosey said.

The Los Angeles Department of Water and Power estimated its refund would have been about $50 million, said Jonathan Diamond, spokesman for the city attorney's office. Both power agencies claim that California still owes them money for energy sales, which would have offset any refunds.

A spokesman for the Sacramento Municipal Utility District said the appellate court made the right decision based on the "unambiguous" language in federal law.

Senior Attorney Kevin Smith said the district had used its credit during the energy crisis to buy power on behalf of the state. He said he didn't know how much the state had requested from the utility in overcharges.

"We were not into this to make money," Smith said. "We were trying to keep the lights on."

California has alleged that it was the victim of widespread manipulation of both the price and supply of energy in its newly deregulated electricity market. As prices soared in 2000 and 2001, the state faced energy shortages and rolling blackouts. The crisis cost the state billions of dollars and disrupted energy markets across the West.

Several energy companies have settled claims with California, paying the state about $1.5 billion in refunds so far. The state also has negotiated settlements related to its long-term energy contracts and other claims, state officials said.

The case is Bonneville Power vs. Federal Energy Regulatory Commission, No. 02-70262.

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On the Net:

9th Circuit: http://www.ca9.uscourts.gov/