Utility suit claims Truckee customers were overcharged
Truckee Donner Public Utility District customers may have been paying too much for electricity since the first of the year.
In what resembles an Enron-type situation, TDPUD is accusing its wholesale electric power provider, Idacorp Energy, of breaching its long-term power supply contract with the district, engaging in unfair competition and charging unfair and unreasonable prices for electricity.
On July 23, the TDPUD brought these charges before the Federal Energy Regulatory Commission (FERC), with whom it filed a formal complaint against Idacorp.
“After Enron, and all of the information about the manipulation of the Western power market became public, we started to wonder if we, too, had been victims of that type of manipulation,” said TDPUD General Manager Peter Holzmeister. “That, among other reasons, is why we want the FERC to review our contract, and if we have been victims, we want to be refunded.”
TDPUD is seeking reformation or, if need be, termination of its current power contract with Idacorp – which it’s locked into through 2009 – among other forms of relief from the FERC.
The Energy Crisis
The district first entered into a contract with the wholesale energy provider in 1997. For the first few years, TDPUD faced energy prices based on the going market rates for electricity. Then, from 1999-2001 TDPUD locked in prices for a year at a time.
In March of 2001, amidst the full-blown energy crisis and skyrocketing market prices, TDPUD sought to again lock in prices under its contract in efforts to guarantee some stability in the district in future years.
TDPUD Assistant Manager Stephen Hollabaugh said in order to protect against volatile market prices, TDPUD had to agree to a long-term contract.
According to Hollabaugh’s affidavit, the specifics the March 2001 agreement were that Truckee would purchase 10 megawatts during off-peak hours at $72 per megawatt-hour and 20 megawatts during on-peak hours at the same price. Then, starting Jan. 1, 2003 and ending Dec. 31, 2009, TDPUD would purchase 25 megawatts around the clock from Idacorp at the same $72 per megawatt-hour energy charge.
Since that crisis period, however, rates for power have dropped significantly, information about power marketers like Enron manipulating Western markets and unfairly driving up prices has surfaced, and the TDPUD finds itself with unreasonable energy bills as it tries to light up its customers’ homes.
And according to Hollabaugh, that isn’t the end of it.
As part of TDPUD’s contract with the Idacorp, it was forced to buy a surplus of power in order to receive the rates it did on a long-term basis.
“One of the problems is that Truckee has such a unique power load,” Hollabaugh said. “We have our peaks on weekends and holidays, as well as during the winter – times when other areas do not.”
As a surplus in power was further draining financially on the district, another agreement between the two parties was that Idaho Power would use its “best efforts” to help Truckee remarket that surplus.
TDPUD claims that the Idaho parties have repeatedly failed to do so, however, and thus stand in breach of contract.
Since then, Hollabaugh said he’s learned that Idacorp Energy’s obligation under its contract with its sister company, Idaho Power, was to give first priority to marketing Idaho Power’s surplus rather than the surplus of its other customers like TDPUD.
In the end, it isn’t just the district that’s been paying the price, but TDPUD customers, who’ve seen three rate increases for electricity since last Aug., with prices climbing from 6.8 cents per kilowatt-hour to nearly 10 cents.
Even water fees have increased because of the electricity needed to pump water out to people’s homes.
With the TDPUD currently paying $72 per megawatt-hour, Hollabaugh said it’s possible now to purchase electricity for half as much.
“We’ve had to [raise rates] because of this contract,” he said. “Our main goal now is to bring our contract in line with today’s energy prices. We’d much rather settle this through mediation with the FERC’s help, than through a long drawn out court battle, though.”
Idaho Files A Suit of Its Own
Tackling these concerns through mediation was exactly what TDPUD was originally trying to do back in late May, before Idacorp slapped the district with a lawsuit of their own.
“As part of our contract, it states that if we have an issue of concern, we’re supposed to send Idacorp a letter – so we did,” Holzmeister said.
According to a press release sent out by TDPUD, Idacorp met with district staff and expressed an interest in resolving any disputes without litigation.
“Although Idacorp purported to enter into good faith negotiations with TDPUD, Idacorp filed a lawsuit against TDPUD two hours before TDPUD representatives met with Idacorp representatives in Boise on May 30, 2002,” stated the release.
“Idacorp did not notify TDPUD of the filing until the next day. Idacorp had an opportunity to inform TDPUD staff that they had filed suit, but chose to keep that secret and acted as if they were searching for a solution without resorting to litigation.”
The lawsuit filed by Idacorp asks the court to declare that the company is not in breach of the agreement with TDPUD and order the district to pay Idacorp in accordance with that contract.
According to Idacorp Energy’s Manager of Marketing and Communications Jeff Schaus, the company chose to file suit when it did to “protect its legal rights.”
“We feel that we have fulfilled and continue to fulfill our contractual obligations and are seeking a declaratory judgement to confirms that,” Schaus told The Sierra Sun.
Despite uncertainty, the TDPUD has continued to pay its Idacorp bills each month, in full.
Watch and Wait
At the TDPUD’s request, Idacorp’s lawsuit has been transferred from state to federal court in Idaho, yet the TDPUD is hoping that the FERC, which oversees wholesale energy agreements such as this one, will be the ultimate decider of the dispute.
“We believe this is primarily a FERC issue because ultimately, it’s a rate problem,” Holzmeister said.
As it stands, the FERC will not take any action on TDPUD’s complaint until some time after Idacorp submits its response, which is due Aug. 12.
Meanwhile, as if this wasn’t a big enough mess, TDPUD said they’ve recently received word that Idacorp is downsizing its services.
“On June 21, Idacorp announced plans to wind down its power marketing business,” TDPUD stated in a press release.
“The company announced that it expects to reduce Idacorp Energy staff by 50 percent over the next 18 months and to reduce working capital requirements to less than $100 million over the same period. On July 8, Idaho Power announced that beginning Aug. 1, it would re-establish in-house marketing capability and sever its relationship with Idacorp Energy.”
Schaus, with Idacorp Energy, says this shouldn’t be an issue of concern, though.
“Our scaling back is really only relating to accepting new businesses and does not affect our existing companies,” Schaus said. “Because of the political and regulatory uncertainty of the power markets, we believe that it’s in the company’s best interest not to risk taking on new customers. However, we will continue to fulfill all other contractual duties.”
Even though the company vowed to honor all existing contracts until completion, TDPUD still fears these developments may further impair Idacorp’s ability to meet all of its commitments.
“Things are changing on a daily basis,” Holzmeister said. “For now, there’s not much we can do except wait. However, we want our customers to know that we’re doing our damnedest to roll back electricity prices. We’re fighting for our customers right now, to keep prices as low as we can.”
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