Emergency Motion of City of San Diego

Due to the risk of wholesale market participants becoming bankrupt and
therefore unable to flow refunds through to customers, the City of San Diego
has asked FERC to direct sellers of wholesale power in the "California"
markets to sequester any amounts collected from sales that are in excess of
costs and to maintain those amounts, with interest, adequate to pay potential
refund obligations. It also asks FERC to clarify that these amounts are
being retained by the sellers in trust to fulfill refund obligations.

I think we should make the following arguments at FERC:

In the In re Columbia Gas Systems Inc. case relied on by San Diego, FERC had
ordered, and Columbia had received, refunds from upstream pipelines, but had
not specified that Columbia was to hold those refunds in trust for its
customers. To my knowledge, none of the refunds FERC has recently required
would be paid to EPMI, nor has FERC required EPMI to make any refunds, it has
merely conditioned its rates "subject to refund." Accordingly, it is
inappropriate for EPMI to be required to sequester any of its profits.
San Diego seeks to apply this requirement to every participant in the market,
although it has not proven that refunds would put EPMI on the verge of
insolvency. It has simply said that "there is no assurance that the actual
wholesale sellers , , , are capable of paying the refunds that potentially
may be ordered."
San Diego also alleges that the potential refund obligation is immense. This
allegation is based on San Diego's allegation that the refund liability
calculated by FERC's March 9 order (of $69 million) is vastly understated.
This is suppostion, on supposition, not to mention a collateral attack on the
Commission March 9 order.
The pleading is in essence a request for cost-of service based rates given
that market participants would be deprived of any benefit of participating in
the market for years - "pending a final nonappealable order in these
proceedings." Therefore, it is a collateral attack on FERC's December 15
order finding that it would not order cost based rates.
This pleading also seeks refunds beyond what could be required pursuant to
FERC's December 15 order in that its would apply sequestering to sellers of
wholesale power "in the California markets" not just for sales in the ISO and
PX markets.