California Public Utilities Commission officials announced they plan to file a complaint with federal authorities today asking them to abrogate or rewrite 44 long-term power contracts that it says are unfair by $21 billion. CPUC officials say commission lawyers will file the complaint with the Federal Energy Regulatory Commission tomorrow.
“It is our hope that the FERC moves expeditiously on this matter to give much-needed justice to ratepayers,'' California commission president Loretta Lynch said.
“When these contracts were negotiated, the sellers had California over a barrel. Now it's time for the FERC to recognize last year's out of control market prices and lower California's power costs,” she said.
The complaint, copies of which were made available to reporters on Sunday, says that in January, 2001 “at the height of the California market dysfunction,” the California Department of Water Resources was “thrust into the position of embarking on an unprecedented program of power procurement.”
That happened, the complaint says, at a time when the market was “dominated by the exercise of market power” by power companies that initial mitigation efforts by the federal officials only made worse.
“In this environment, despite its best efforts, CDWR was forced to pay unjust and unreasonable prices, and to agree to onerous, unjust and unreasonable non-price terms and conditions, in order to secure the power necessary to ensure that the lights stayed on in California,” the complaint says.
The complaint says that in many cases, the state was “forced to accept high-priced power for 10 or even 20 years in order to obtain any power at all for the two to three year period in which it sought to focus its efforts.”
The complaint says the challenged contracts violate applicable law because their prices, terms, and conditions are "tainted with the exercise of market power” and therefore "unjust and unreasonable” under the Federal Power Act. Among the allegedly unfair terms cited are provisions providing for payment priority over bond repayment, a requirement that the water resources department remain creditworthy without a corresponding requirement on the part of the sellers along with other "asymmetrical” terms.
A spokeswoman for San Jose-based Calpine Corp., one of the companies targeted in the complaint, said Sunday that the action had been expected and “will have no impact on the company's ability to continue to deliver electric power to Californians on the terms of its current contracts with the state.” She said Calpine is “confident that the FERC will find Calpine's long-term contracts with the California Department of Water Resources are just and reasonable.”