SMUD, others hit by power crisis suit

The lawsuit, filed by the California Electricity Oversight Board, Pacific Gas and Electric Co. and Southern California Edison, is the latest chapter in the state's attempt to recover refunds from the market meltdown of 2000-01.

Filed in U.S. District Court in Sacramento, the lawsuit doesn't accuse the Sacramento Municipal Utility District and other government-owned power sellers of any wrongdoing.

Rather, it claims they essentially piggybacked on the mayhem created by power sellers who manipulated prices. Under the system created by California's flawed deregulation scheme, all sellers received the same price.

"The artificially inflated prices created windfall profits for all sellers," the suit says. The suit doesn't specify damages, but PG&E spokesman John Nelson said the refunds would total as much as $500 million.

The municipals are expected to fight the case. SMUD General Counsel Arlen Orchard called the suit "without merit" and said SMUD was "one of the good guys" during the energy crisis because it sold power to the state when California was desperate for it.

"SMUD hasn't been paid for sales it made in the market then," he said. "So we find it ironic that the investor-owned utilities are asking us to refund monies that we haven't even received yet."

Dave Dockham, power management director for Roseville-based Northern California Power Agency, said: "We're kind of at a loss as to what they're upset about and chalking it up to 'no good deed goes unpunished.'"

The agency runs power plants on behalf of 18 north state cities and special districts.

Like SMUD, it said it honored the state's urgent requests for power throughout the energy crisis.

The lawsuit came as no surprise. The state, which says ratepayers are owed $9 billion for overcharges, has obtained about $5 billion from corporate power generators through a refund process overseen by the Federal Energy Regulatory Commission.

Last September, a federal appeals court said FERC couldn't order government-owned power sellers to make refunds.

But the court said the state and the big utilities could sue directly for the refunds.

The California attorney general's office is contemplating a separate lawsuit, against many of the same municipal entities, on behalf of the state Department of Water Resources.

DWR bought power on behalf of PG&E and Edison starting in January 2001 after the utilities, bled dry by soaring prices, were too crippled financially to buy the power themselves.

DWR believes it's owed $650 million, said Tom Dresslar, a spokesman for the attorney general.