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November 25, 2001

Chamber Urges Federal Energy Regulators to Preempt State Litigation on CA Power Dispute

WASHINGTON, D.C., Nov. 26, 2001 – The United States Chamber of Commerce urged the U.S. Federal Energy Regulatory Commission (FERC) to exercise its full and exclusive authority to preempt state courts from dictating how power companies determine electricity rates and compensate customers for overcharges.

“The Federal Power Act clearly gives FERC the authority to preempt any imposition of state law in this case and the Constitution’s Supremacy Clause supports that authority,” said James Wootton, president of the Chamber Institute for Legal Reform. “Furthermore, it is reasonable to conclude that an expert regulatory body like FERC is better equipped to handle the highly technical aspects of free-market energy pricing than a state court jury.”

At issue is an ongoing dispute in California in which private class-action trial lawyers and state government officials are suing California generators of wholesale electricity for allegedly conspiring to fix prices above competitive levels during California’s energy crisis last year. Plaintiffs are hoping to recover not only refunds for overpayments, but to collect significant punitive awards as well.

The plaintiffs want California courts to decide what prices were reasonable and which outages and other conduct by sellers were lawful. FERC, which regulates wholesale electricity markets, is conducting a broad administrative proceeding to address the alleged overcharges in California, and the Chamber’s Institute for Legal Reform recently submitted a brief on Federal preemption issues arguing that only FERC can decide these matters under the law.

FERC has already ordered refunds in amounts equal to the difference between the wholesale prices that the sellers charged at the time and lower just and reasonable prices pursuant to a new FERC formula. The FERC proceeding is to determine the specific dollars to be refunded by each seller under the formula. FERC has entered a refund order in the only complaint about specific outages, and the Commission also has statutory authority to deal with any other specific allegations of unlawful conduct by sellers affecting prices in California wholesale markets.

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