FERC Orders Issued April 6th

MEMORANDUM

TO: Regulatory Affairs Committee
Power Marketers Working Group

FROM: Joe Hartsoe, Regulatory Affairs Committee Chair
Bob Reilley, Power Marketers Working Group Chair
Julie Simon, Vice President of Policy
Mark Bennett, Senior Manager of Policy
Erin Perrigo, Manager of Policy

DATE: April 6, 2001

RE: FERC Orders Issued April 6th (1) CalPX Chargebacks;
(2)CalPX Rate Recalculations; and (3) Kern River
Certificate

We want to inform you of three significant orders FERC issued today, two
relating to the California Power Exchange (CalPX), and the third concerning a
pipeline project from Wyoming to California.

(1) Pacific Gas & Electric Company v. California Power Exchange Corporation,
et al. (Docket Nos. EL01-29/33/36/37/43-000) "Order on Complaints Concerning
Use of Chargebacks and Liquidation of Collateral"
In this order, the Commission addressed five complaints against the CalPx
concerning its response to alleged defaults by Pacific Gas & Electric (PG&E)
and Southern California Edison Company (SoCal Edison). Among other things,
the Commission determined that "the chargeback provision in the PX tariff was
not designed to address default of this magnitude and, thus, its application
in these circumstances is unjust and unreasonable." Accordingly, the
Commission directed the CalPX to rescind all prior chargeback actions and
refrain from any future chargeback actions relating to PG&E and SoCal
Edison's liabilities, subject to further Commission action in accordance with
the order.
Regarding the ultimate question of how the PX should account for the
nonpayments by SoCal Edison and PG&E, the Commission deferred further action
pending the outcome of SoCal Edison's State Court Complaint, as well as the
Government Claims Board Complaint. Finally, with respect to the PX's
bankruptcy proceeding, the Commission concluded that section 362(b)(4) of the
Bankruptcy Code allowed it to lawfully exercise its regulatory power under
sections 205 and 206 of the Federal Power Act, so long as it did not threaten
the bankruptcy court's control over the property of the bankruptcy estate.

(2) San Diego Gas & Electric Company v. Sellers of Energy and Ancillary
Services (Docket Nos. EL00-95-015/016 and Docket Nos. EL00-98-014/015) "Order
Dismissing Rehearing, Accepting Compliance Filing, and Directing the
Recalculation of Lower Wholesale Rates"
In this order, the Commission dismissed the CalPX's request for rehearing of
the Commission's January 29, 2001 order, which found that the CalPX had
violated the Commission's December 15, 2000 order and the Federal Power Act.
The December 15 order required the CalPX to pay suppliers in the CalPX
markets their as-bid price above the $150/MWh breakpoint. Additionally, the
Commission accepted the PX's compliance filing and provided guidance to the
PX on an acceptable methodology so that the PX may implement the $150/MWh
breakpoint for its January 1, 2001 invoices. Additionally, as in the
chargeback case, the Commission determined that its action in the instant
case was exempt from the automatic stay provision of the Bankruptcy Code.

(3) Kern River Gas Transmission Company (Docket No. CP01-106-000) "Order
Issuing Certificate"
Pursuant to section 7© of the Natural Gas Act, the Commission denied the
protests that had been filed and issued a certificate of public convenience
and necessity to Kern River authorizing it to construct and operate its
California Action Project, subject to resolution of the proceeding pending in
Docket No. CP01-61-000. However, the Commission rejected Kern River's
proposal to utilize a return on equity for this project of 15.25 percent.
Instead, the Commission directed Kern River to file a revised incremental
rate to reflect a return on equity of 13.25 percent at least 30 days prior to
commencing service. Finally, the Commission conditioned the certificate on
Kern River's compliance with the environmental conditions set forth in
Appendix C to the order.

These orders can be found on the Bulk Power section of FERC's website, at
www.ferc.fed.us/electric/bulkpower.htm. If you have any questions, comments
or would like additional information relating to these orders, please contact
either Julie Simon (jsimon@epsa.org) or Mark Bennett (mbennett@epsa.org) at
(202) 628-8200.