Settlement ends Avista Energy suit

Avista Energy, the utility’s former energy trading subsidiary, has received $15 million through a settlement with California utilities that accused it of manipulating spot energy prices in that state during the 2000-2001 West Coast energy crisis.

None of the parties admitted guilt in the settlement, which resolved a 14-year legal battle over skyrocketing electricity prices during the energy crisis. The Federal Energy Regulatory Commission, or FERC, approved the settlement earlier this month.

California utilities defaulted on their payments for the high-priced electricity, which Avista Energy eventually wrote off to the tune of about $37 million, said Jessie Wuerst, an Avista spokeswoman.

The money was held in escrow while the litigation was ongoing, she said. After the $15 million payment to Avista Energy, the remaining escrow funds were distributed to California utilities.

The California parties involved in the settlement were Pacific Gas and Electric, San Diego Gas & Electric Co., Southern California Edison Co., the California attorney general’s office and the California Public Utilities Commission.

Avista Energy was created as a subsidiary of Avista Corp. in 1997, buying and selling excess energy from other utilities.

In 2000, FERC began investigating allegations of market manipulation. The commission ordered more than 140 utilities to provide information about their electricity trading in conjunction with a review of the wholesale markets during 2000 and 2001.

California was hard-hit during the energy crisis, when energy shortages caused by a drought year were exacerbated by market manipulation, leading to massive, rolling blackouts that cost the state billions of dollars.

FERC investigators eventually cleared Avista Energy of wrongdoing, saying the subsidiary didn’t manipulate the market or knowingly assist others in electricity trading that artificially inflated prices to more than 100 times normal during that period.

The investigation focused on a series of Avista Energy trades that also involved Enron Power Marketing Inc. and Portland General Electric Co., both subsidiaries of Enron Corp.

Enron traders were later implicated in schemes to manipulate prices. In one scheme, Enron traders bought electricity in California at prices capped by the state. They exported and then re-imported the power back into California at market prices many times higher.

Avista eventually sold its energy trading business to Coral Energy, a Royal Dutch Shell subsidiary, in 2007. Avista Energy has remained in name only while the litigation was ongoing, Wuerst said.

One more piece of West Coast energy crisis litigation against Avista Energy remains. Seattle City Light has brought claims similar to the California utilities against Avista Energy. The case is pending before FERC.

Avista donated $6.5 million from the settlement to its charitable foundation, which invests in community programs. The rest of the money will go toward corporate operations, including the possibility of paying down debt, officials said.