EWEB settles power sales suit.

Byline: Jeff Wright The Register-Guard

A long and complex legal morass may have ended Wednesday when the Eugene Water & Electric Board approved a settlement with California agencies over the sale of surplus electrical power during the West Coast energy crisis of 2001.

Under terms of the agreement, EWEB admits no wrongdoing but nonetheless will pay $1.9 million to the California Department of Water Resources. The money will come from EWEB's reserves, and will not affect customer rates, utility officials said.

The settlement resolves a series of lawsuits and countersuits between EWEB and several California agencies that contended that EWEB sold power at unfair prices.

Dick Helgeson, EWEB's power resources director, said EWEB emphatically denies such allegations.

The Federal Energy Regulatory Commission, he said, already has ruled that EWEB's power sales during the energy crisis "were appropriate, honest and aboveboard and, in fact, helped California in a time of crisis."

EWEB's decision to settle is strictly a financial consideration, Helgeson said. EWEB attorneys had estimated that it could cost $5 million more to prevail in court, and California has "enormous resources" to prolong the matter, Helgeson said.

"It doesn't make sense to again prove an expensive point," he said. "It is never easy to pay money to someone else when you know you are in the right. But it's always a risk going the distance in a court of law."

EWEB's legal fees to date on the matter total $1.4 million. EWEB General Manager Randy Berggren said the utility will try to recover both those legal fees and the $1.9 million settlement amount from its insurance carrier.

Commissioner John Simpson, who earlier in the meeting was elected to serve as board president for this year, said efforts to have insurance pick up the costs are a board priority.

Commissioners approved the settlement 4-0, with member Patrick Lanning absent. The board had reviewed the settlement with its lawyers at an earlier nonpublic session.

During the 2001 energy crisis, which resulted in "brownouts" and skyrocketing wholesale power prices, California's water department purchased from EWEB nearly $100 million worth of power.

EWEB officials noted that EWEB sold the power at California's request, and that California has taken similar legal action against nearly every utility from which it purchased power during the crisis.

EWEB and its customers were as much a victim as the state of California when energy trading companies manipulated prices in California's de-regulated the industry in 2000 and 2001, EWEB spokesman Lance Robertson said.

EWEB approved electrical rate increases exceeding 40 percent in 2001, and added a surcharge in 2002 after the utility's reserves were exhausted and it had to borrow nearly $30 million to meet its own customers' power needs.

The surcharge was ended in 2004 when EWEB paid off the borrowed money and rebuilt its reserves.

Factors in the crisis included a drought resulting in less power from EWEB's own dams, power prices that reached 10 or 20 times their normal levels, and federal energy officials' refusal to immediately impose price caps.

By the time caps were imposed, EWEB had entered into dozens of short-term contracts for future power deliveries at prices averaging three to five times what it charged its retail customers.

Market prices plummeted, and EWEB suddenly found itself saddled with a surplus of electricity that it was selling for a fraction of what it cost to buy.

In some ways, EWEB feels like a friend who helps someone in need and then gets blamed when things go bad, Robertson said.

"If it hadn't been for the power that we and other Northwest utilities provided, California would have been in the dark," he said. "It's too bad it's kind of come back to haunt us. Needless to say, we don't sell power to the California Department of Water Resources anymore."