PSE sues largest customers 2001-02-06 by Tony Dondero Journal Business Reporter

Puget Sound Energy has filed a breach of contract suit seeking more than $100 million in damages from six of its largest industrial customers, alleging the companies reneged on a 1996 electricity purchasing agreement.

The Western power crisis, prompted by California's failing experiment with utility deregulation, has fueled the conflict between Bellevue-based PSE and some of its largest and most sophisticated customers.

The dispute began when skyrocketing wholesale electricity rates prompted eight large industrial customers to file a complaint with the Washington Utilities and Transportation Commission Dec. 12 that claimed rates had become unfair and unjust.

http://www.southcountyjournal.com/sited/story/html/43761

-- Martin Thompson (mthom1927@aol.com), February 06, 2001

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Tuesday, February 06, 2001, 12:00 a.m. Pacific

Utility files suit, cites rate woes

by Eric Sorensen Seattle Times science reporter Puget Sound Energy has filed suit against six of its largest customers, including Boeing, saying they have reneged on an agreement to buy power at spot-market rates.

The companies were among eight Puget customers that filed last month with the state Utilities and Transportation Commission for relief from soaring prices, which were much higher than expected when they contracted to buy the power. One of the companies, Georgia Pacific, idled hundreds of workers in December; others are using diesel generators and stepping up conservation efforts.

The commission last month ordered a "soft cap" on the rates the Bellevue-based utility charged the complaining companies and its five other largest customers. Puget, commission staffers and the customers have been working out details of the cap, which would limit what the customers pay, unless Puget can prove the rates fail to cover its costs.

While those negotiations continue, Puget filed suit late last week in King County Superior Court claiming unspecified damages because of a perception on Wall Street that the commission's "soft cap" could leave the utility "financially paralyzed." Standard & Poor's last week put Puget's credit rating in "watch negative" and Moody's revised its outlook from stable to negative.

The suit is letting the companies "know that their actions are creating a damaging effect and having an impact on the financial condition of Puget Sound Energy," said Dorothy Bracken, a company spokeswoman.

In addition to Boeing, Puget has named in the suit Air Liquide America Corp., Air Products & Chemical Inc., Equilon Enterprises LLC, Georgia-Pacific West, and Tesoro Petroleum Corp.'s Tesoro Northwest unit.

The city of Anacortes and CNC Containers had joined companies in seeking relief from the utilities commission. They aren't named in the suit because they were not part of the original contract with Puget in 1996, Bracken said. The contract runs through 2001 and contains an agreement not to seek changes to market-based rates until the end of October, she said.

Melinda Davison, an attorney representing the eight companies before the commission, said Puget's lawsuit is an attempt to retry the commission case while it is still being worked out.

Puget will not be financially damaged, she said, because it only has to prove such damage to the commission to get its costs covered.

"The cost associated with serving the industrial load will be paid for by the industrial customers at all times," Davison said.

Dean Tougas, a spokesman for Boeing, said he thought the commission is assuring that the utility would not be hurt by the changed rates.

"We're a little surprised and disappointed at the filing of the suit while we've got these discussions going on," he said. "The soft cap that the UTC ruled they would put in place we thought provided fair and reasonable rates for everyone."

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-- Martin Thompson (mthom1927@aol.com), February 06, 2001.