BC Hydro has reached an out-of-court settlement to settle claims in California that their Powerex unit drove up prices during the 2000 to 2001 California power crisis.
They will pay $750 million, and say this settlement will protect British Columbia from a potential $3.2 billion legal liability.
The claims were related to the power crisis that saw rolling blackouts and record-high electricity prices. Powerex was one of more than 60 electricity sellers in the California market during that time.
Following the outages, numerous lawsuits were launched demanding refunds and penalties. In 2003, the US Federal Regulatory Commission (FERC) concluded that the California market was dysfunctional and ordered refunds from all the sellers who sold electricity during the crisis.
The settlement is with California utilities, the California Attorney General, and other California parties.
“This was a tough but necessary decision to protect taxpayers. We have learned that the U.S. court system can be unpredictable,” said Minister of Energy and Mines Bill Bennett and Minister Responsible for Core Review. “When you weigh this settlement versus a potential $3.2 billion legal liability, we determined it was in the best interest of taxpayers to settle and put this long standing dispute behind us.”
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Previously, 47 sellers have settled their claims, but Powerex and 15 other sellers were not among them. Another FREC hearing was scheduled for August 27, and court appointed mediators approached Powerex for a possible settlement.
The government says in addition to protecting B.C. from potential legal liability worth billions of dollars, the settlement allows Powerex to avoid future legal costs.
Since 2003, Powerex has sold more than $3.5 billion worth of electricity to California. A review that same year found there was no evidence Powerex engaged in any illegal practices.
The 2000 – 2001 California power crisis was a result of numerous factors, including electricity market deregulation in 1998, fewer power plants being built in California in the years leading up to the crisis, drought conditions resulting in lower than expected runoff for power generation, rupture and capacity constraints on natural gas pipelines to the California market, increased demand for electricity, and unusually high temperatures and heat waves.
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