Reliant settles with Ferc for up to $50m

The US Federal Energy Regulatory Commission (Ferc) yesterday reached agreement with subsidiaries of Houston-based Reliant Resources to settle all its investigations in connection with its review of manipulation of the Californian energy markets. The proceeds of the settlement could total $50 million, the Ferc said.

The settlement agreement – the Ferc’s largest ever - addresses allegations regarding potentially manipulative bidding practices in the Californian markets, including economic withholding, physical withholding of generation, and a Ferc staff finding that Reliant attempted to manipulate prices at an electricity trading hub near the California border.

Reliant did not admit to the violations in agreeing the settlement, which calls for the company to pay $15 million in cash within 30 days. Two more instalments of $5 million each are due by September 30, 2005, and September 30, 2006. As much as another $25 million could also be derived from Reliant’s auctioning of 824 megawatts of generation capacity over the next three years.

The settlement proceeds from the three annual auctions will be dependent upon market conditions, the Ferc said, but they will not exceed $25 million. California’s investor-owned and municipal utilities will have the right of first refusal for this low-cost capacity, the Ferc added. The settlement funds will be deposited into a special treasury fund for the benefit of California and western-US electricity customers, and the Ferc plans to address dispersal of those funds in a future proceeding.

The agreement also calls for strict reporting by Reliant to the Ferc’s Office of Market Oversight and Investigations of all sales for one year. Reliant is also required to retain all telephone conversation tapes of employees trading electricity for three years.