The Bonneville Power Administration and Southern California Edison have agreed on a proposal to settle two long-standing lawsuits. SCE filed the suits against BPA in the U.S. Court of Federal Claims regarding a 1988 power sales contract.

“This settlement is in the best interest of Pacific Northwest consumers because it will resolve long-standing and potentially expensive litigation at a modest cost,” said Steve Wright, BPA administrator. “The cost may be offset by payments BPA believes it is owed by a variety of California parties.”

If the proposed settlement is successfully completed, BPA will pay SCE US$28.5 million plus interest to resolve claims against the agency totaling approximately $208 million. However, the payment would be made by BPA only on final resolution of separate litigation in the California refund proceedings.

The California refund proceeding, now pending before the Federal Energy Regulatory Commission and the subject of many claims and lawsuits, seeks to resolve complaints of parties in the 2000-2001 power market when prices rose to unprecedented levels. BPA believes it should be paid for power it delivered to California but for which it never received payment. The SCE settlement is structured so that the settlement payment will be paid only when the California refund proceedings are resolved and the net amount, if any, due to BPA, has been received in its entirety.

The two claims filed by SCE relate to a contract executed in 1988 in which BPA agreed to sell or exchange power with SCE. The dispute began in 2000 when BPA converted the transaction from a power sale to a power exchange, which SCE objected to. Later, in 2000 and continuing through 2001, additional issues arose regarding the timing of SCE’s return of the exchange energy back to BPA.

The parties ultimately reached an impasse, and BPA subsequently terminated the contract for default in 2001. In December 2002, SCE filed a lawsuit in the Court of Federal Claims claiming that BPA breached the contract by converting it to an exchange in 2000. In 2004, SCE brought another lawsuit that claimed BPA improperly terminated the contract in 2001. SCE sought damages of approximately $208 million for these two claims.

“The settlement would help put the fallout of the West Coast energy crisis behind us,” said Wright. “It would protect Northwest ratepayers while reestablishing a collaborative business relationship with an important business partner in California.”

A notice announcing a 30-day public comment period on the proposed settlement will be sent to BPA customers and other interested parties in the near future. The settlement would become final on approval by BPA after the public comment period and after endorsement of the settlement by the California Public Utility Commission.