RE: Two Major Inconsistencies in FERC's Most Recent Refund Order

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Steve,
Great email! Arbitrary and capricious indeed.
More like ridiculous.

-----Original Message-----
From: Hall, Steve C.
Sent: Thursday, July 26, 2001 5:32 PM
To: Alvarez, Ray; Comnes, Alan; Mara, Susan; Steffes, James D.; Sanders, Richard B.; 'gfergus@brobeck.com'; Yoder, Christian; Perrino, Dave; Walton, Steve; Kaufman, Paul; Belden, Tim; Richter, Jeff; Williams III, Bill
Subject: Two Major Inconsistencies in FERC's Most Recent Refund Order and the Nov 1 and Dec 15 Orders
Importance: High

The FERC apparently has a very short memory:

1. In its Dec. 15, 2000 Order, FERC clarified that liability for refunds would only last for 60 days after the transaction was filed with FERC. How can FERC now say that transactions from Nov. 1 through April 26 are subject to refund? The Dec. 15 Order said that only transactions that were identified by Commission staff for further review would be subject to continued refund liability. Otherwise, refund potential for transactions over $150/MWh would close after 60 days. Presumably, liability for transactions under $150/MWh would close after 60 days, too.

Here is the excerpt from the Dec. 15 Order:

"We clarify that, unless the Commission issues some form of notification to a seller that its transaction is still under review, refund potential on a particular transaction will close 60 days after the initial report is filed with the Commission. The institution of a 60-day period for the review of the transactions will provide sellers with the certainty they request and allows a reasonable period for analysis by staff." Dec. 15 Order at 58.

2. In its Nov. 1 Order, FERC said that it would limit refund liability to seller's marginal costs or legitimate and verifiable opportunity costs. FERC now says that marketers cannot use their purchased power costs---much less opportunity costs---to offset potential refunds.

From the Nov. 1 Order: "However, should we find it necessary to order refunds, we will limit refund liability to no lower than the seller's marginal costs or legitimate and verifiable opportunity costs." Nov. 1 Order at 39.

FERC's July 25 Order makes no attempt to explain its departure from its earlier holdings on refunds in this same proceeding. Arbitrary and capricious, anyone?

Steve

Alan: Please forward to Dan Watkiss and Ron Carroll.