B.C. defends Powerex in California price-fixing complaint

The B.C. government and official opposition are defending a BC Hydro subsidiary that is accused of manipulating energy prices during the California energy crisis more than 12 years ago.

Energy Minister Rich Coleman and NDP energy critic John Horgan presented a united front Thursday, insisting that Powerex Corp. did nothing wrong in what it charged for its electricity exports to the United States.

"Anything I've read, Powerex did their business properly and weren't involved in any price fixing," Coleman said.

Powerex is one of 30 electricity sellers that have been accused of inflating electricity prices during the summer of 2000, when areas of California experienced shortages that led to rolling blackouts and other power emergencies. The state's two largest utility companies became insolvent after purchasing billions of dollars in electricity from outside companies.

NDP MLA John Horgan said the lawsuits against Powerex and other companies are showing that the Americans continue to refuse to accept responsibility for what happened.

"It was a case of us providing electricity, not gaming the market, as Enron did," he said.

"California deregulated their energy market, [and] found they had no energy. The people of British Columbia provided that energy at the cost that the market was prepared to pay at that time," Horgan said.

"Whether it be with softwood lumber or energy, whenever our American trading partners don't like what we're doing, they go to court." he said.

'False exports' resold at high prices

Last week, a judge with the U.S. Federal Energy Regulatory Commission issued an initial decision in the complaint submitted by the San Diego Gas & Electric Company. The judge said that Powerex owed over $27 million in refunds for the sale of more than 660,000 MWh of electricity to San Diego alone.

The judge said that Powerex, acting as the power marketer for BC Hydro, sold electricity in the U.S. when prices were high and bought energy in the U.S. and sent it to Canada when prices were low.

The judge said Powerex manipulated the markets by scheduling false exports of power from California and selling those exports back into California at inflated prices. TransAlta Corporation, an energy company based in Calgary, was also named in the complaint.

Other cases involving other California-based utilities are outstanding, and B.C. taxpayers could be on the hook for hundreds of millions in total.

John Irving, the chief legal officer for Powerex, said in an email that the ruling is an initial decision "that has no force or effect."

He added: "We will file an appeal of this decision to the Federal Energy Regulatory Commission and will continue to participate in the U.S. legal process."

Irving said that in the past decade, U.S. regulators have consistently ruled in Powerex’s favour.

"These rulings clearly reinforce our position that Powerex has always acted lawfully while working hard to ensure Californians received the electricity they needed during their extraordinary energy crisis."

Funds put aside for penalties

Coleman said BC Hydro has been fighting the allegations for the past decade, and there will likely be many more years in court.

Coleman couldn't say how much the province has spent in legal fees on the cases, but he said the B.C. government has been putting aside funds to cover large fines and refunds that could be ordered by the courts.

"I think we're covered," he said.

"The big question is, can we get to the point where we don't have to hand over what we've set aside, and get it back."