EVERETT — Snohomish County PUD got a strong ally Monday in its U.S. Supreme Court battle to overturn a $200 million electricity contract signed during the West Coast energy crisis.
Attorneys general for Washington state on Monday afternoon filed legal papers arguing the PUD is on firm legal ground in insisting federal power regulators should have questioned the reasonableness of a 2001 power contract the utility entered with Morgan Stanley Capital Group Inc.
If the PUD and state attorneys prevail, the ruling ultimately could net the publicly owned utility millions of dollars.
A ruling supporting the PUD’s position also would buttress protection for electricity users around the state, regardless of whether they buy their energy from a public utility, deputy attorney general Jeff Goltz said.
Federal energy regulators “really should look at these contracts and evaluate them critically with the eye toward protecting the ultimate consumers,” Goltz said.
The PUD is glad to have the assistance of state attorneys in trying to make the case, PUD spokesman Neil Neroutsos said.
“We are appreciative of the attorney general’s support,” he said. “It is an important legal issue” and may help PUD customers.
The case, to be argued before the high court early this year, focuses on the response of federal regulators after electricity prices soared in 2000-01 due to manipulations of the energy market by suppliers such as Enron Corp.
The Supreme Court has been asked to rule whether the Federal Energy Regulatory Commission was correct in refusing to nullify the PUD’s contract with Morgan Stanley. It lasts until 2009.
The 9th Circuit Court of Appeals in December 2006 sided with the PUD and directed FERC to reconsider. Morgan Stanley appealed, arguing that upholding the agreement is necessary to preserve predictability in energy markets.
While the PUD’s former contract with Enron has attracted the most attention, the Morgan Stanley deal packed a significant punch for local power customers, state attorneys said in court papers.
The PUD increased its retail power rates by nearly 60 percent during the energy crisis. The Morgan Stanley contract, on its own, accounted for about one-sixth of the increase, even though it supplied the utility with only 3 percent of its power supply, court papers said.
When the PUD attempted to have the contracts declared invalid, federal regulators argued they could not intervene, regardless of evidence that power markets had been manipulated to artificially inflate prices.
State attorneys plan to argue that Congress intended regulatory scrutiny of power contracts for fairness, Goltz said. The federal laws governing interstate energy sales date to the 1920s and 1930s, when public utilities were first taking root in the Northwest.
If the PUD and state lawyers prevail, they’d still have to convince the Federal Energy Regulatory Commission that the Morgan Stanley contract was too lopsided and unfair. Utility officials are hopeful they’ll get a refund on some of the more than $175 million already paid out.
The PUD has had some recent success with federal regulators. In June, FERC ruled the PUD shouldn’t have to pay penalties for breaking its $180 million contract with Enron. The utility’s lawyers uncovered taped conversations of Enron day traders scheming to drive up prices. The PUD settled the case by agreeing to pay $18 million to the bankrupt corporation and its creditors. That was 10 cents on the dollar. FERC approved the settlement last week.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
