Largest Out-Of-Court Settlement With Electricity Seller Reached

Calif., Canadian utility agree on $750M for overcharging
By Christian Watjen
Christian Watjen
Christian Watjen
August 16, 2013 Updated: August 16, 2013

SAN FRANCISCO—A Canadian utility has agreed to a $750 million refund as part of a settlement for overcharging California ratepayers during the state’s energy crisis more than a decade ago, Attorney General Kamala Harris and the Public Utilities Commission announced Friday.

Harris and the PUC say the deal with Powerex is the largest out-of-court settlement with electricity sellers to date. State officials accused the British Columbia-owned hydroelectric utility of market gaming by purchasing electricity from California, shipping it to Canada, and then selling it back to California at exorbitant prices between 2000 and 2001.

“Californians suffered through huge rate hikes and blackouts during the energy crisis,” Harris said in a statement. “This settlement brings long-awaited compensation to California ratepayers for Powerex’s conduct.”

State officials say with the pending settlement with Powerex, California will have collected about $4 billion in refunds from electricity sellers during and after the energy crisis.

About 47 electricity sellers have since settled separately with the state of California, Powerex said in a statement released Friday.

California state officials say other claims with other sellers are pending.

“I hope the remaining sellers who have not yet agreed to settle our refund claims will wake up and take notice of this major settlement by Powerex,” CPUC Commissioner Mike Florio said in a statement Friday. “I encourage them to follow suit and reach their own settlements with us.”

Powerex said it has sold more than $3.5 billion worth of electricity to California since 2003.The company said the settlement comes before a scheduled Aug. 27 hearing as well as avoids a potential $3.2 billion legal liability.

“This was a tough but necessary decision to protect taxpayers. We have learned that the U.S. court system can be unpredictable,” Bill Bennett, British Columbia’s energy and mines minister, said in a statement. “We determined it was in the best interest of taxpayers to settle and put this long standing dispute behind us.”

The company said following the power crisis, the Federal Energy Regulatory Commission in 2003 concluded the California market was dysfunctional and ordered refunds from all sellers who sold electricity during the crisis.

Powerex said it admits no wrongdoing by reaching a settlement, citing a 2003 review by the FERC that concluded that the company did not engage in any illegal practices.

The company said it will incur a net loss of about $101 million as a result of its settlement with California, which still must be approved by the FERC.

The PUC says most of Powerex’s refund will be distributed among customers from California’s three largest utilities, Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison.

Christian Watjen
Christian Watjen