Constellation to get millions from Calif.

FERC tells state to refund part of required collateral

October 02, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

The now-defunct California Power Exchange will return a portion of millions of dollars in collateral that Constellation Energy Group Inc. was required to post in late 2000 and in 2001 to participate in the state's electricity trading market, federal regulators have ruled.

In response to a request filed by Constellation a month after the power exchange folded in January, the Federal Energy Regulatory Commission has directed CalPX to release two of the three letters of credit that Constellation had provided.

Although the FERC did not specify the amount to be returned, the regulatory agency has ordered CalPX to hold onto $10 million of Constellation's collateral to cover any refunds the Baltimore company might be ordered to pay as a result of possible price overcharges for power during the crisis.

"We're getting money back, so we're all for that," Constellation spokesman Charles B. Welsh said yesterday. "It frees up money to increase our liquidity and makes money available for other ventures."

The state of California claims tht it is due nearly $9 billion from energy companies for overcharges during the power crisis in 2000 and last year. Gov. Gray Davis has accused energy companies of manipulating power prices and withholding power from the state to send prices soaring to more than $1,000 per megawatt-hour. Before the crisis, prices were about $30 per megawatt-hour.

At the time, energy companies including Constellation were issued a line of credit from CalPX to buy and sell power in the California energy market. To receive that credit, those energy companies were required to post collateral beyond the credit line for security.

When CalPX folded Jan. 31, Constellation requested that its collateral be returned, but CalPX refused. In response, Constellation filed a complaint with the FERC.

On July 30, the FERC rejected Constellation's request on the grounds that it was not known how much liability each participating energy company had in overcharging California. On Aug. 29, Constellation filed a request for a rehearing.

The California Electricity Oversight Board, Southern California Edison Co. and Pacific Gas and Electric Co. urged the FERC to uphold its July ruling.

In its order issued Monday, the FERC granted part of Constellation's request, stating, "Upon reconsideration, we believe that Constellation must maintain collateral with CalPX in the amount of 10 million dollars, which by our conservative estimate, will be sufficient to cover the potential refund liability resulting from Constellation's transactions" in the California power market.

Since the crisis, California has been purchasing power for its utilities through the California Department of Water Resources. At the height of the crisis, California signed long-term power contracts with Constellation and other utilities to lock in prices and supplies. As the crisis diminished, the state found that it had contracted for more power than it needed and was locked into higher prices as the wholesale cost of electricity was dropping.

The governor, attorney general and various agencies in California have been pressuring companies to renegotiate those contracts. Constellation settled with the state in April.

Shares of Constellation rose 90 cents yesterday to close at $25.69.

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