`
`UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
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`Enron Power Marketing, Inc.
` and Enron Energy Services Inc.
`Aquila, Inc.
`City of Glendale, California
`City of Redding, California
`Colorado River Commission
`Constellation Power Source, Inc.
`Coral Power, L.L.C.
`El Paso Merchant Energy, L.P.
`Eugene Water and Electricity Board
`Idaho Power Company
`Koch Energy Trading, Inc.
`Las Vegas Cogeneration, L.P.
`MIECO
`Modesto Irrigation District
`Montana Power Company
`Morgan Stanley Capital Group
`Northern California Power Agency
`PacifiCorp
`PECO
`Powerex Corporation
` (f/k/a British Columbia Power
` Exchange Corporation)
`Public Service Company of New Mexico
`Sempra Energy Trading Corporation
`TransAlta Energy Marketing (U.S.) Inc.
` and TransAlta Energy Marketing
` (California) Inc.
`Valley Electric Association, Inc.
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`Docket No. EL03-180-000
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`Docket No. EL03-181-000
`Docket No. EL03-182-000
`Docket No. EL03-183-000
`Docket No. EL03-184-000
`Docket No. EL03-185-000
`Docket No. EL03-186-000
`Docket No. EL03-187-000
`Docket No. EL03-188-000
`Docket No. EL03-189-000
`Docket No. EL03-190-000
`Docket No. EL03-191-000
`Docket No. EL03-192-000
`Docket No. EL03-193-000
`Docket No. EL03-194-000
`Docket No. EL03-195-000
`Docket No. EL03-196-000
`Docket No. EL03-197-000
`Docket No. EL03-198-000
`Docket No. EL03-199-000
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`Docket No. EL03-200-000
`Docket No. EL03-201-000
`Docket No. EL03-202-000
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`
`Docket No. EL03-203-000
`(Consolidated)
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`MOTION OF THE CALIFORNIA PARTIES
`FOR LEAVE TO FILE INTERLOCUTORY APPEAL OF ORDER
`DENYING MOTIONS TO COMPEL PRODUCTION OF
`CERTAIN AUDIO TAPES AND OTHER MATERIALS
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`To: The Honorable Isaac D. Benkin
` Presiding Administrative Law Judge
`Pursuant to Rule 715(b) of the Rules of Practice and Procedure of the Federal
`Energy Regulatory Commission (Commission), 18 C.F.R. § 385.715(b) (2003), the
`California Parties1 hereby respectfully request that the Presiding Judge permit an
`interlocutory appeal of his December 3, 2003 Order Denying Motions to Compel
`Production of Certain Audio Tapes and Other Materials, as amended on December 4,
`20032 (the December 3 Order).3
`The Commission Trial Staff (Trial Staff) and the California Parties are required
`to submit their case-in-chief testimony regarding the Respondents’ collusive market
`manipulation schemes on December 19, 2003, without having access to all of the
`materials the Commission ordered the Respondents to produce. As described by the
`Presiding Judge, Respondents have resorted to a variety of arguments and assertions to
`avoid full compliance with the Commission’s Partnership Entities Order.4 Although
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`1 The California Parties are the People of the State of California, ex rel. Bill Lockyer,
`Attorney General (Attorney General), the California Electricity Oversight Board (EOB), the
`California Public Utilities Commission (CPUC), Pacific Gas and Electric Company (PG&E),
`and Southern California Edison Company (Edison).
`2 Presiding Administrative Law Judge’s Order Amending Order Denying Motions to
`Compel Production of Audio Tapes and Other Materials, Docket Nos. EL03-180-000 et al.
`(Dec. 4, 2003) (amending Paragraph (P) 19).
`3 In response to the Presiding Judge’s statement that the issues raised herein could be
`presented to the Commission, December 3 Order at P 23, see also P 15, the California Parties
`are filing a motion with the Commission today. This Motion for Leave to File Interlocutory
`Appeal also is being filed so there is no question as to full compliance with the requirements
`of Rule 715.
`4 Enron Power Mktg., Inc., et al., 103 FERC ¶ 61,346 (2003) (Partnership Entities
`Order).
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`he finds blatant violations of the Commission’s Order, including finding in his
`December 3 Order that the “close reading” of the Commission’s order to avoid
`compliance is “utter nonsense,” the Presiding Judge holds that he is powerless to
`enforce it.
`As a result, extraordinary circumstances exist that make prompt Commission
`review of the contested order necessary to prevent detriment to the public interest. As
`grounds for this motion the California Parties state the following:
`I. Background
`The Commission’s June 25 Partnership Entities Order finds that “based on a
`report by Commission Staff (Staff Final Report), and evidence and comments
`submitted by market participants, there is evidence that Enron Power Marketing, Inc.
`and Enron Energy Services Inc. (Enron) and a number of entities . . . (collectively,
`Partnership Entities) worked in concert through partnerships, alliances or other
`arrangements (jointly, Partnerships) to engage in activities that constitute gaming
`and/or anomalous market behavior (Gaming Practices) in violation of the California
`Independent System Operator Corporation’s (ISO) and California Power Exchange’s
`(PX) Tariffs during the period January 1, 2000 to June 20, 2001.”5 The Order also
`finds “that there is evidence that a number of Partnership Entities . . . appear to have
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`5 Id. at P 1.
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`had similar Partnerships, which could be attempts to engage in similar activities as the
`Enron partnerships.”6
`The June 25 Partnership Entities Order directs the Partnership Entities to show
`cause, in a trial-type evidentiary proceeding to be held before an Administrative Law
`Judge, why they should not be found to have engaged in the Gaming Practices
`(identified in the Gaming Practices Show Cause Order7) in violation of the ISO’s and
`PX’s tariffs.8 The Partnership Entities were directed to file show cause responses. In
`addition, the Commission required the filing of “all related” materials with the
`Commission:
`47. We also require the Partners hip Entities to (1) inventory all
`revenues from their partnerships, alliances or other arrangements
`discussed above and (2) file these revenue figures as well as file all
`related correspondence, e-mail, memoranda, tapes, phone logs,
`transaction data, billing statements and agreements as part of their show
`cause responses. This requirement applies to both sides of an agreement
`regardless of whether the entity is supplying or receiving service. If a
`Partnership Entity does not provide this information and it is later
`discovered that such agreements exist, that may be grounds for other
`possible remedies.
`Partnership Entities Order, 103 FERC at P 47 (Paragraph 47).
`On October 29, 2003 (as corrected on October 30, 2003) the California Parties
`filed with the Presiding Judge a Motion to Compel certain Respondents to produce
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`6 Id.
`7 American Elec. Power Serv. Corp., et al., 103 FERC ¶ 61,345 (2003) (Gaming
`Order).
`8 Partnership Entities Order, 103 FERC at PP 2 and 46.
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`audio tapes in response to Paragraph 47.9 On November 7, 2003, the California
`Parties filed a Second Motion asking the Presiding Judge to issue an order requiring
`certain Respondents to produce other materials required by Paragraph 47.10 Trial Staff
`filed an Answer Supporting the Motion to Compel.11 Answers were filed by
`Respondents to both the Motion to Compel and the Second Motion.
`II. Presiding Judge’s Ruling
` In his December 3 Order the Presiding Judge, among other things, finds that he
`is not authorized to administer Paragraph 47 of the Commission’s Partnership Entities
`Order and that Paragraph 47 has nothing to do with the conduct of the hearing in these
`proceedings:
`On its face, Paragraph 47 is a blunt instrument, not a surgeon’s scalpel. I
`do not think I am authorized to administer it; nor do I think it has
`anything to do with the conduct of the hearing with which I am charged.
`December 3 Order at P 23.
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`9 Motion of the California Parties to Compel Production By Respondents of Audio
`Tapes and Related Materials Associated With Respondents’ Partnerships, Alliances and
`Similar Arrangements, Docket Nos. EL03-180-000, et al. (Oct. 29, 2003, as corrected Oct. 30,
`2003) (Motion to Compel).
`10 Second Motion of the California Parties to Compel Production By Respondents of
`Materials Associated With Respondents’ Partnerships, Alliances and Similar Arrangements,
`Docket Nos. EL03-180-000, et al. (Nov. 7, 2003) (Second Motion to Compel).
`11 Answer of the Commission Trial Staff in Support of California Parties Motion to
`Compel Production of Audio Tapes and Related Materials (Nov. 6, 2003).
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`III. Showing Under Rule 715
`Rule 715 requires a showing of “extraordinary circumstances which make
`prompt Commission review of the contested ruling necessary to prevent detriment to
`the public interest or irreparable harm to any person.” This standard is plainly met.
`As explained in detail below, Paragraph 47 was designed to provide a broad
`evidentiary foundation for further investigation into the alleged collusive Gaming
`Practices by the named Respondents through a trial-type evidentiary proceeding. As
`described by the Presiding Judge, Respondents have resorted to a variety of arguments
`to avoid full compliance with the requirements of the Commission show cause order.
`Although he finds blatant violations of the Partnership Entities Order, the Presiding
`Judge holds that he is powerless to enforce it. Thus, the Trial Staff and the California
`Parties are required to submit their case-in-chief testimony regarding the Respondents’
`collusive market manipulation schemes on December 19, 2003 without having access
`to all of the materials the Commission ordered the Respondents to produce. Therefore,
`extraordinary circumstances exist which make prompt Commission review of the
`December 3 Order necessary to prevent detriment to the public interest.
`IV. Argument
`A. Paragraph 47 Is an Integral and Inseparable Part of the Procedures
`Established in These Proceedings
`Contrary to the finding made in the December 3 Order, Paragraph 47 of the
`Partnership Entities Order is clearly related to the conduct of the hearing in these
`proceedings. It is an integral and inseparable part of the trial-type procedures
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`established by the Commission for this proceeding. Paragraph 47 does not have a
`separate, independent purpose; it is part of the procedures established by the
`Commission to get to the bottom of concerns about the use of alliances and
`partnerships to engage in manipulative market schemes. The Partnership Entities
`Order initiates a show cause proceeding with the following statement:
`[W]e require these entities to show cause in a trial-type evidentiary
`proceeding to be held before an ALJ, why they should not be found to
`have engaged in Gaming Practices in violation of the ISO’s and PX’s
`tariffs. They shall submit their show cause responses within 30 days of
`the date of this order.
`Partnership Entities Order, 103 FERC at P 46; see also P 2. Paragraph 47 follows to
`identify the actions and materials the Commission will “also require” from the
`Partnership Entities. The next paragraph, Paragraph 48, directs the ALJ, “[i]n
`addition,” to hear evidence and render findings and conclusions on the extent to which
`the Partnership Entities were unjustly enriched.12
`Thus, Paragraph 47 is sandwiched between two explicit directives to the
`Presiding Judge. This placement shows that Paragraph 47 was intended to “jump-
`start” the proceedings by providing a comprehensive collection of materials from
`which the Trial Staff and the parties could investigate the facts. The requirements of
`Paragraph 47 are designed to enhance the efficiency and fairness of the hearing. The
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`12 The Commission’s news release described the requirements of Paragraph 47 as
`“part of the show cause process.” News Release, Commission Issues Sweeping Show Cause
`Orders to Companies Alleged to Have Gamed Western Energy Markets; Hearings Set to
`Explain Actions, Address Remedies (June 25, 2003). Available at:
`<http://www.ferc.gov/press-room/pr-archives/2003/2003-2.asp>.
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`Presiding Judge errs, therefore, in finding that Paragraph 47 has nothing to do with the
`conduct of the hearing.
`B. The Presiding Judge Has Authority to Administer Paragraph 47
`The December 3 Order erroneously concludes that the Presiding Judge has no
`jurisdiction or authority to administer Paragraph 47.13 The Presiding Judge has
`concurrent jurisdiction with the Commission and may enforce the Partnership Entities
`Order, including Paragraph 47. Because this matter has been set for hearing, Rule
`504(b)(18) and (20) gives the presiding officer the power to “require . . . further
`evidence upon any issue” and the power to “[t]ake any other action necessary or
`appropriate to the discharge of the duties of a presiding officer, consistent with
`applicable law and policy.” 18 C.F.R. § 385.504(b)(18) and (20).
`The Presiding Judge’s conclusion that he has no remedial powers with regard to
`Paragraph 47 is puzzling, especially since the Partnership Entities Order gives the
`Presiding Judge broad authority to recommend monetary and non-monetary remedies,
`including the revocation of market-based rate authority and revisions to the
`Respondents’ codes of conduct.14
`In the December 3 Order the Presiding Judge properly exercises his authority as
`a presiding officer to make a variety of findings and conclusions appropriate and
`consistent with a determination that the Presiding Judge is authorized to administer
`and enforce Paragraph 47. For example, the Presiding Judge finds that there are only
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`13 December 3 Order at PP 23 and 24.
`14 Partnership Entities Order at P 48.
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`two valid reasons for failure to file the materials called for by Paragraph 47.15 The
`Presiding Judge directs Respondent EWEB to file a newly-discovered audio tape
`“forthwith,” and denies motions to compel as to two parties where the requested
`materials were not in their possession.16 The Presiding Judge properly dismisses
`Respondents’ excuses for failure to fully comply with Paragraph 47 based on claims of
`burden and proprietary rights.17 He also correctly rejects the “close reading” of
`Paragraph 47 relied on by some Respondents to withhold materials.18
`In light of these findings, the Presiding Judge and the Commission should have
`at their disposal a full range of potential remedies and sanctions. It should be clear
`that severe consequences may result from the Respondents’ delay or refusal to provide
`complete show cause responses, including: disgorgement of all profits during the
`period, default judgments, refusal to accept into evidence materials offered by the
`Respondent, negative inferences drawn against the Respondent, or such other remedy
`as the Presiding Judge or Commission finds appropriate for any failure to comply with
`the Commission’s express order. The Presiding Judge should fulfill his role as
`presiding officer by requiring compliance with Paragraph 47 and recommending
`sanctions for those who have not complied.
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`15 Id. at P 15.
`16 Id. at PP 11 and 10.
`17 Id. at PP 16 and 18.
`18 Id. at P 19.
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`C. Discovery Is Important, But Is Not a Substitute for Compliance with
`Paragraph 47
`The Presiding Judge implies that the information called for by Paragraph 47
`was and is available to the California Parties through standard discovery procedures.19
`The Presiding Judge states that, as far as he is aware, “neither the Staff nor any of the
`California Parties exercised their rights to seek Paragraph 47 materials under the
`Commission’s Discovery Rules.”20 However, by the time discovery began, the
`Presiding Judge already had ruled that Respondents were required to serve unredacted
`copies of their responses to the Commission’s Partnership Entities Order on the parties
`and Trial Staff by October 3, 2003.21 This necessarily included the Paragraph 47
`materials. Thus, there was no need for discovery by the California Parties to obtain
`the materials required to be produced by Paragraph 47. By the time the Presiding
`Judge ruled on the motions to compel, the last day for discovery on Respondents’
`case-in-chief evidence had passed.22
`The discovery process -- and the power and flexibility it gives the presiding
`officer -- may be superior in some respects to the “blunt instrument” of Paragraph
`47.23 However, Paragraph 47 serves an important purpose. Full and prompt
`compliance with Paragraph 47 by Respondents would have allowed this proceeding to
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`19 Id. at P 22.
`20 Id. at P 3.
`21 Presiding Administrative Law Judge’s Order Establishing Procedures, Docket Nos.
`EL03-180-000, et al. (Sept. 16, 2003) (Order Establishing Procedures).
`22 The last day for such discovery was November 28, 2003. Order Establishing
`Procedures.
`23 December 3 Order at P 23.
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`be conducted fairly and efficiently. Show cause orders are an important tool for
`achieving the Commission’s regulatory responsibilities. The Presiding Judge should
`not have shied away from enforcing Paragraph 47. The December 3 Order sets
`unfortunate precedent that will only encourage future targets of Commission inquiry to
`“stonewall” in response to Commission orders, so as to delay and take their chances on
`favorable discovery rulings.
`D. The Production of Paragraph 47 Materials Should Be a Prerequisite
`for Continuation of Hearing Procedures
`The procedural schedule calls for case-in-chief evidence by Staff and
`intervenors on December 19, 2003.24 In light of the recalcitrance of some parties in
`submitting Paragraph 47 materials, Staff requested that the due date for Staff and
`intervenor testimony be extended by four weeks to January 16, 2004 and that other
`dates be left intact. The Presiding Judge opposed this proposal as a putative
`“punishment” that works to Respondents’ advantage, stating that Staff and the
`California Parties should file their cases promptly and on time so as to move the
`hearing forward as rapidly as possible.25 To the contrary, however, the real advantage
`to Respondents is their ability to require Staff and the California Parties to proceed
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`24 On December 1, 2003, the California Parties filed a motion requesting an order
`from the Chief Judge extending by three months the dates for the issuance of initial decisions
`and orders from Judge Benkin as well as Judge Cintron suspending the procedural schedules
`in the cases before them. Expedited Motion of the California Parties for Modification of the
`Dates for Initial Decision and Suspension of Procedural Schedules Pending Further Action on
`Filed and Expected Settlements and Motions to Dismiss, Docket Nos. EL03-152-000 and
`EL03-180-000 (Dec. 1, 2003).
`25 December 3 Order at P 20.
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`without the benefit of all the Paragraph 47 materials. A delay in the schedule is vital
`so that the California Parties are not unduly prejudiced. This delay is appropriate and
`should be granted in addition to any sanctions that may be ordered for non-compliance
`with the Commission order.
`V. Conclusion
`In sum, enforcement of Paragraph 47 of the Partnership Gaming Order -- by the
`Presiding Judge or by the Commission -- should be a prerequisite to the continuation
`of these proceedings.
`WHEREFORE, the California Parties respectfully request permission to appeal
`the December 3 Order to the Commission.
` Respectfully submitted,
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`/s/ Richard L. Roberts
`__________________________
`Richard L. Roberts
`Catherine M. Giovannoni
`Steptoe & Johnson LLP
`1330 Connecticut Avenue, N.W.
`Washington, D.C. 20036
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`/s/ Michael D. Mackness
`__________________________
`Michael D. Mackness
`Southern California Edison Company
`2244 Walnut Grove Avenue
`Rosemead, CA 91770
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`Attorneys for
`Southern California Edison Company
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`/s/ Kermit R. Kubitz
`__________________________
`Joshua Bar-Lev
`Mark D. Patrizio
`Kermit R. Kubitz
`Pacific Gas and Electric Company
`77 Beale Street, B30A
`Post Office Box 7442
`San Francisco, CA 94120
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`Attorneys for
`Pacific Gas and Electric Company
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`/s/ Victoria Kolakowski
`__________________________
`Erik N. Saltmarsh, Chief Counsel
`Sidney Mannheim, Senior Staff Counsel
`Victoria Kolakowski, Staff Counsel
`California Electricity Oversight Board
`770 L Street, Suite 1250
`Sacramento, CA 95814
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`Attorneys for the
`California Electricity Oversight Board
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`/s/ David M. Gustafson
`__________________________
`Bill Lockyer
`Attorney General
`Andrea Hoch
`Acting Chief Deputy Attorney General
`Thomas Greene
`Senior Assistant Attorney General
`Office of the Attorney General of the
`State of California
`1300 I Street, Suite 125
`Sacramento, CA 95814
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`David M. Gustafson
`Deputy Attorney General
`1515 Clay Street, 20th Floor
`Oakland, CA 94612-0550
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`/s/ Sean H. Gallagher
`__________________________
`Arocles Aguilar
`Sean H. Gallagher
`Traci Bone
`Public Utilities Commission of the State
` of California
`505 Van Ness Avenue, Room 5035
`San Francisco, CA 94102
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`Attorneys for the
`Public Utilities Commission of the State of
`California
`/s/ Kevin J. McKeon
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`__________________________
`Kevin J. McKeon
`Lillian S. Harris
`Craig R. Burgraff
`Hawke McKeon Sniscak &
` Kennard
`LLP
`Harrisburg Energy Center
`100 North Tenth Street
`P.O. Box 1778
`Harrisburg, PA 17101
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`Attorneys for the
`People of the State of California, ex rel.,
`Bill Lockyer, Attorney General
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`December 5, 2003
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`CERTIFICATE OF SERVICE
`I HEREBY CERTIFY that I have this day served the foregoing document by
`email upon each person designated on the ListServ established in Docket Nos. EL03-
`180-000, et al.
` Dated at Washington, D.C. th is fifth day of December, 2003.
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`
` /s/ Joseph E. Stubbs
` _ _ _ _ ______________________
`Joseph E. Stubbs
`Steptoe & Johnson
`LLP
`1330 Connecticut Avenue, N.W.
`Washington, D.C. 20036
`Tel: (202) 429-6463
`Fax: (202) 429-3902
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