BC Hydro subsidiary on the hook for market manipulation in California
A U.S. Federal Energy Regulatory Commission (FERC) judge ruled last week that more than a dozen electricity wholesalers – including Powerex, a wholly owned subsidiary of BC Hydro – were guilty of market manipulation in California in 2000.
If the FERC adopts the judge's decision, the wholesalers could collectively be required to pay back up to $1 billion in refunds of overcharges, plus an additional $600,000 in interest.
"We've been saying for years that California was victimized by rampant manipulation," said Mike Florio, commissioner for the California Public Utilities Commission (CPUC).
"It warms my heart to see a 'guilty' verdict from an impartial judge, and to consider the fact that as a result we now stand to win back more than a billion dollars for consumers.
"This money was stolen from ratepayers in California by a bunch of sellers who conducted business like pirates."
As of press time, representatives of CPUC were unable to provide an estimate of Powerex's share of the potential amount the wholesalers face having to payback.
Powerex chief legal officer John Irving said, "We see this latest decision involving 16 energy sellers including Powerex, as another step in a legal process that has been underway for over a decade and may go on for years before we reach resolution.
"This is an initial decision that has no force or effect. We will file an appeal of this decision to the Federal Energy Regulatory Commission and will continue to participate in the U.S. legal process."
The ruling relates to the summer of 2000 when California suffered record-breaking electricity prices, rolling blackouts and other system emergencies. The high prices pushed the state's two largest utility companies into insolvency and led to the state purchasing billions of dollars in electricity externally.
The judge found sellers manipulated the markets in multiple ways, including by scheduling false exports of power from California and then selling it back into the state at inflated prices.
This is not the only legal case involving sales of energy to California during this period. There is an ongoing case relating to a similar situation in the spring of 2001 that is expected to go to trial before a different FERC judge in April.
According to the FERC website, Powerex is also involved in this second case and could be liable to refund between $800 million and $1 billion, making it the largest player in this particular case.