Economic burden from long-term contracts signed during California Power Crisis
In a large litigation case before the Federal Energy Regulatory Commission (FERC) regarding two long-term contracts that the California Department of Water Resources (CDWR) signed with Shell and Iberdrola during the California Energy Crisis, Brattle experts provided four separate testimonies on market manipulation and tariff violations in the spot energy markets inflating forward power prices, and the prices in the two contracts resulting in a large economic burden on consumers. We estimated the “down the line” economic burden by comparing the payments under the contracts to prices in comparable contracts and market prices after the end of the dysfunction. We also assessed whether the contract prices could be explained by the expected future market fundamentals in the California power markets by using DAYZER market simulation software for the near-term and expected cost of installing and operating a new generation unit for the long-term. The decision from the presiding ALJ largely adopted the conclusions in our testimony.