VANCOUVER – Federal energy regulators in the United States have reportedly dealt BC Hydro a major setback in its efforts to dispute at least $265 million US worth of electricity bills relating to a California market manipulation case dating to 2000.
Hydro, through its power trading export subsidiary Powerex, has been fighting lawsuits and U.S. federal regulatory proceedings based on allegations that it and other traders manipulated California’s wholesale electricity market after the state bungled a power market deregulation program.
According to a report Thursday in the Los Angeles Times, an “initial decision” issued Feb. 15 by a U.S. federal judge has ruled in favour of the state in its efforts to recover up to $1.6 billion in what it claims are overcharges by more than a dozen power trading companies operating in the state at the time.
The judge’s decision must be endorsed by commissioners of the U.S. Federal Energy Regulatory Commission, or FERC, before it can take effect.
The case dates back to 2000, when Powerex and other energy trading companies including Enron began making huge profits in California’s troubled electricity market. Power prices in California rose during some peak consumption hours to 100 times the norm. The state was hit by rolling blackouts and brownouts and one utility, Pacific Gas & Electric, was driven into bankruptcy.
Some of the companies settled with the state several years ago, others have continued to dispute California’s allegations that they unlawfully manipulated the market in order to drive up profits.
In its most recent annual report, BC Hydro notes that it is owed $265 million US by the California Power Exchange, representing unpaid electricity bills from the crisis.
Hydro also advises that it expects any settlements it incurs as a result of the regulatory and legal proceedings would be offset against the money it is still owed.
However, Hydro cautions that the final amount of settlements could differ from the amount still owed by the power exchange.
Energy Minister Rich Coleman said the case is likely to be held up in court for several more years, adding he is confident Powerex did nothing wrong.
“We believe we didn’t operate in any way that was in any way fraudulent or problematic,” he said.
“The decision is only part of the process. We’ll continue to go through court for many more years to come, I suspect,” he added.
“It’s been hanging around a long time and we just have to continue to defend our position.”
Coleman added the government has set aside enough money to cover any potential payout, though he said the hope is that money will not be needed.
“I think what we’ve set aside has us covered on this thing. The big question is can we get to the point where we don’t have to have what we set aside and get it back,” he said.
New Democratic Party energy critic John Horgan also supported Powerex, adding he believes there was nothing wrong with the activities in question, which happened while an NDP government was in power.
“California deregulated their energy market, found they had no energy and the people of British Columbia provided that energy at the cost that the market was prepared to pay at that time. It was unfortunate for them. It was fortunate for us,” he said.
“Whether it be with softwood lumber or energy, whenever our American trading partners don’t like what we’re doing they go to court. The Powerex case is before the courts for almost 12 years now. It was a case of us providing electricity, not gaming the market as Enron did,” he added.
“The significant difference between Enron and Powerex was that Powerex provided electricity. Powerex kept the air conditioners going and kept the lights on. Enron gamed the system. They were found guilty, people went to jail,” he said.
“I’m confident that what happened was within the confines of a free market. The people of California changed their energy structure. They needed energy. They were prepared to pay that price, and we provided it.”
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