FERC orders CalPX to return three letters of credit to Constellation Energy Group

Oct. 3, 2002 — The Federal Energy Regulatory Commission (FERC) has ordered the California Power Exchange (CalPX) to refund three letters of credit to Constellation Energy Group.

CalPX is undergoing bankruptcy and Constellation had asked that the exchange release its letters of credit. FERC in July directed CalPX to keep the letters of credit. The Sept. 30 FERC decision partially reverses that order.

Constellation had provided CalPX with the letters of credit to be used as collateral for participating in the exchange’s electricity markets.

According to the order, CalPX was directed to keep $10 million of the collateral and release everything else back to the company.

FERC also said it will deny requests for rehearing submitted by the California Electricity Oversight Board (CEOB) and the Official Committee of Participant Creditors (Committee).

They are owed money for sales into the CalPX-administered markets or are owed money for sales into the California Independent System Operator (CAISO) real-time market for which CalPX acted as a scheduling coordinator for investor-owned utilities.

In making the decision, FERC said this would allow Constellation to obtain financing, ensure that Constellation meets its outstanding obligations and ensure that the ultimate CalPX creditors are paid.

As a condition for participating in CalPX’s markets, Constellation was required, in accordance with CalPX’s tariff, to post collateral for 100 percent of its requirements in CalPX’s markets in excess of its unsecured line of credit.

As a result, Constellation posted three letters of credit with the CalPX to cover its aggregate outstanding liabilities to CalPX, as required by the CalPX’s tariff. After CalPX suspended operations in its core markets on January 31, 2001 and its tariff terminated on May 1, 2001, CalPX refused to release Constellation’s collateral.

In response, Constellation filed a complaint requesting that the commission direct CalPX to release the collateral posted by Constellation. The July 30 order rejected Constellation’s complaint and directed CalPX to retain the collateral posted by Constellation and other market participants in accordance with CalPX’s tariff on the ground that the amount of Constellation’s outstanding liability was not yet known.

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