UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION San Diego Gas & Electric Company v. Sellers of Energy and Ancillary Services Investigation of Practices of the California Independent System Operator and the California Power Exchange Investigation of Wholesale Rates of Public Utility Sellers of Energy and Ancillary Services in the Western Systems Coordinating Council State of California, ex rel. Bill Lockyer, Attorney General of the State of California v. British Columbia Power Exchange Corp. Fact-Finding Investigation Into Possible Manipulation of Electric and Natural Gas Prices American Electric Power Service Corporation Enron Power Marketing, Inc. and Enron Energy Services Inc. California Independent System Operator Corporation Investigation of Anomalous Bidding Behavior and Practices in Western Markets Docket No. EL Docket No. EL Docket No. EL Docket No. EL Docket No. PA Docket Nos. EL , et al. Docket Nos. EL , et al. Docket No. ER Docket No. IN

2 People of the State of California, ex rel. Edmund G. Brown, Jr. Attorney General of the State of California. v. Powerex Corp. (f/k/a British Columbia Power Exchange Corp. Puget Sound Energy, Inc. v. All Jurisdictional Sellers of Energy and/or Capacity at Wholesale Into Electric Energy and/or Capacity Markets in the Pacific Northwest, Including Parties to the Western Systems Power Pool Agreement. Docket No. EL Docket No. EL JOINT OFFER OF SETTLEMENT Mieco Inc. ( Settling Supplier and the California Parties 1 (collectively, the Parties respectfully request the Federal Energy Regulatory Commission ( FERC 1 For purposes of this pleading, California Parties means, collectively, Pacific Gas and Electric Company, San Diego Gas & Electric Company, Southern California Edison Company, the Public Utilities Commission of the State of California ( CPUC, and the People of the State of California ex rel. Kamala D. Harris, Attorney General. For purposes of the August 19, 2016 Settlement and Release of Claims Agreement ( Settlement Agreement, California Parties means the aforementioned entities as well as the California Department of Water Resources acting solely under the authority and powers created by Assembly Bill 1 of the First Extraordinary Session of , codified in Sections through of the California Water Code (continued - 2 -

3 or Commission to approve this Joint Offer of Settlement ( Joint Offer to resolve certain claims in the captioned proceedings arising from events and transactions in Western Energy Markets 2 during the period January 1, 2000 through June 20, 2001 (the Settlement Period as they relate to Settling Supplier. In accordance with Rule 602 of the Commission s Rules of Practice and Procedure, 18 C.F.R (2014, the Parties attach hereto the following documents: a Joint Explanatory Statement (Attachment A; and the Settlement Agreement (Attachment B. I. GENERAL OVERVIEW OF SETTLEMENT The Settlement Agreement provides for the settlement of claims against Settling Supplier arising from events and transactions in Western Energy Markets during the Settlement Period as they are alleged to relate to Settling Supplier. The monetary consideration flowing to Settling Supplier in this settlement totals approximately $185,370.34, before final adjustments. It will be funded from interest accrued on Settling Supplier s PX cash collateral. ( CERS. Under the Settlement Agreement, the California Electricity Oversight Board is an Additional Settling Participant. 2 Except as otherwise defined herein, the capitalized terms used herein have the meaning set forth in Article I of the Settlement Agreement

4 The occurrence of the Settlement Effective Date requires, among other things, the CPUC s approval and execution of the Settlement Agreement and the Commission s approval of the Settlement Agreement. The Settlement Agreement permits, but does not require, Participants (i.e., entities that directly sold and/or purchased capacity, energy, and/or ancillary services to or from the ISO and PX markets during the Settlement Period to join Settling Supplier and the California Parties in the Settlement Agreement as Additional Settling Participants. The Settlement Agreement defines the California Parties and Additional Settling Participants, collectively, as Settling Participants. The rights of those entities electing not to join the Settlement Agreement, Non-Settling Participants, are unaffected by the Settlement Agreement. Such entities will neither receive the benefits of the Settlement Agreement nor be subject to its obligations. No funds are made available to pay refunds to the Settling Participants. Participants may nevertheless join the settlement to resolve pending claims. Under the settlement, obligations that the California Parties (or certain of them will assume, subject to specified limitations, include: (1 any true-up of interest on Settling Supplier s receivables resulting from the FERC Interest Determination; (2 any refund amounts that Settling Supplier owes to Non-Settling Participants for the Settlement Period; (3 any Refund Shortfall, Receivables Shortfall, or Interest Shortfall relating to Settling Supplier resulting, respectively, from the FERC Refund Determination, the FERC Receivables Determination, or the FERC Interest Determination, for the Settlement Period; (4 any third-party Refund Offsets (Fuel - 4 -

5 Cost Allowance, Emissions Offset, and Cost Offset that FERC or a reviewing court determines that Settling Supplier owes; (5 Pre-October Period and Refund Period dispute resolution charges; and (6 PX Wind-Up Charges assessed against Settling Supplier after the Settlement Effective Date. Subject to certain limitations, the Settlement Agreement provides for release of the California Parties claims against Settling Supplier and of Settling Supplier s claims against the California Parties for refunds, disgorgement of profits, or other monetary or non-monetary remedies in the FERC Proceedings. The Settlement Agreement similarly provides mutual releases of claims for civil damages and equitable relief. II. REQUEST FOR APPROVAL OF SETTLEMENT The Parties believe that the settlement benefits customers by resolving claims for refunds and other remedies as between Settling Supplier, on the one hand, and the California Parties and Additional Settling Participants, on the other hand, relating to Settling Supplier s transactions in Western Energy Markets during the Settlement Period. Approval of the settlement will avoid further litigation, provide monetary consideration, eliminate regulatory uncertainty, and enhance financial certainty. The settlement reaches a fair and reasonable resolution of issues between Settling Supplier and the Settling Participants. In addition, the settlement fairly protects the rights of Non-Settling Participants. Both the Commission and the United States Court of Appeals for the Ninth Circuit have actively encouraged settlements of claims related to transactions in the - 5 -

6 ISO and PX markets during the crisis period in 2000 and Accordingly, the Parties respectfully request the Commission to approve this Joint Offer as embodied in the attached Settlement Agreement. III. COMMENTS Comments on this settlement should be filed in the above-captioned proceedings. 4 In accordance with Rules 602(d(2 and 602(f, 18 C.F.R (d(2 and (f (2016, initial comments are due on September 13, 2016, and reply comments are due on September 23, See, e.g., San Diego Gas & Elec. Co., 145 FERC 61,015 at P 26 (2013 ( [W]e note that the Commission has long encouraged the settlement of disputes in general and in these proceedings in particular. ; Pub. Utils. Comm n of Cal., 99 FERC 61,087 at 61,384 (2002 ( [W]e want to strongly encourage all parties involved in disputes arising from the California crisis to seriously negotiate settlements. ; Pub. Utils. Comm'n of Cal. v. FERC, No , slip op. at 3 (9th Cir. Oct. 23, 2006 (extending deadlines to encourage further settlement efforts. 4 The Commission has indicated that the proceedings in Docket Nos. PA and IN were investigations initiated pursuant to Part 1b of the Commission s regulations, 18 C.F.R. Part 1b, and has held that there are no parties to such investigations and that comments cannot be filed in those dockets. See, e.g., Fact Finding Investigation of Potential Market Manipulation of Electric and Natural Gas Prices, et al., 105 FERC 61,063, reh g denied, 105 FERC 61,281 (2003, appeal filed sub nom. Pac. Gas & Elec. Co., No , et al. (9th Cir. Oct. 27, These appeals are set for briefing in

7 Respectfully submitted, /s/ Steven A. Weiler Steven A. Weiler Stinson Leonard Street LLP 1775 Pennsylvania Ave. NW, Ste 800 Washington, DC Counsel for Mieco Inc. /s/ Richard L. Roberts Richard L. Roberts Jane I. Ryan Steptoe & Johnson LLP 1330 Connecticut Avenue, NW Washington, DC Russell C. Swartz J. Eric Isken Russell Archer Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, CA Attorneys for Southern California Edison Company /s/ James R. Dean, Jr. James R. Dean, Jr. Covington & Burling LLP One City Center 850 Tenth Street, NW Washington, DC Attorney for San Diego Gas & Electric Company /s/ Stan Berman Stan Berman Eric Todderud Sidley Austin LLP 701 Fifth Avenue, Suite 4200 Seattle, WA Mark D. Patrizio Joshua S. Levenberg Pacific Gas and Electric Company 77 Beale Street, B30A Post Office Box 7442 San Francisco, CA Attorneys for Pacific Gas and Electric Company - 7 -

8 /s/ Christopher E. Clay Christopher E. Clay Candace J. Morey Public Utilities Commission of the State of California 505 Van Ness Avenue Fifth Floor San Francisco, CA Attorneys for the Public Utilities Commission of the State of California /s/ Danette Valdez Kamala D. Harris Attorney General of the State of California Mark Breckler Chief Assistant Attorney General Martin Goyette Senior Assistant Attorney General 455 Golden Gate Avenue, Suite San Francisco, CA Danette Valdez Supervising Deputy Attorney General 455 Golden Gate Avenue, Suite San Francisco, CA /s/ Kevin J. McKeon Kevin J. McKeon Judith D. Cassel Hawke McKeon & Sniscak LLP Harrisburg Energy Center 100 North Tenth Street Harrisburg, PA Attorneys for the People of the State of California ex rel. Kamala D. Harris, Attorney General August 24,

9 CERTIFICATE OF SERVICE I hereby certify that I have this day served an electronic copy of the foregoing document upon each person designated on the ListServs established in Docket Nos. EL00-95, et al., EL01-10, EL03-137, et al., and EL03-180, et al. Dated at Harrisburg, PA this 24th day of August, /s/ Whitney E. Snyder Whitney E. Snyder Hawke McKeon & Sniscak LLP 100 N. 10th Street Harrisburg, PA ( wesnyder@hmslegal.com

10 Attachment A

11 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION San Diego Gas & Electric Company v. Sellers of Energy and Ancillary Services Investigation of Practices of the California Independent System Operator and the California Power Exchange Investigation of Wholesale Rates of Public Utility Sellers of Energy and Ancillary Services in the Western Systems Coordinating Council State of California, ex rel. Bill Lockyer, Attorney General of the State of California v. British Columbia Power Exchange Corp. Fact-Finding Investigation Into Possible Manipulation of Electric and Natural Gas Prices American Electric Power Service Corporation Enron Power Marketing, Inc. and Enron Energy Services Inc. California Independent System Operator Corporation Investigation of Anomalous Bidding Behavior and Practices in Western Markets Docket No. EL Docket No. EL Docket No. EL Docket No. EL Docket No. PA Docket Nos. EL , et al. Docket Nos. EL , et al. Docket No. ER Docket No. IN

12 People of the State of California, ex rel. Edmund G. Brown, Jr. Attorney General of the State of California. v. Powerex Corp. (f/k/a British Columbia Power Exchange Corp. Puget Sound Energy, Inc. v. All Jurisdictional Sellers of Energy and/or Capacity at Wholesale Into Electric Energy and/or Capacity Markets in the Pacific Northwest, Including Parties to the Western Systems Power Pool Agreement. Docket No. EL Docket No. EL JOINT EXPLANATORY STATEMENT Mieco Inc. ( Settling Supplier or Mieco and the California Parties 1 (collectively, the Parties respectfully submit to the Federal Energy Regulatory Commission ( FERC or Commission this Joint Explanatory Statement ( Explanatory Statement as part of a Joint Offer of Settlement to resolve claims in the above- 1 For purposes of this pleading, California Parties means, collectively, Pacific Gas and Electric Company, San Diego Gas & Electric Company, Southern California Edison Company, the Public Utilities Commission of the State of California ( CPUC, and the People of the State of California ex rel. Kamala D. Harris, Attorney General. For purposes of the August 19, 2016 Settlement and Release of Claims Agreement ( Settlement Agreement, California Parties means the aforementioned entities as well as the California Department of Water Resources acting solely under the authority and powers created by Assembly Bill 1 of the First Extraordinary Session of , codified in Sections through of the California Water Code ( CERS. Under the Settlement Agreement, the California Electricity Oversight Board is an Additional Settling Participant

13 captioned proceedings arising from events and transactions in Western Energy Markets during the period January 1, 2000 through June 20, 2001 (the Settlement Period as they relate to Settling Supplier. I. INTRODUCTION This Explanatory Statement is provided solely to comply with Rule 602(c(1(ii of the Commission s Rules of Practice and Procedure, 18 C.F.R (c(1(ii (2014. Except as otherwise defined herein, the capitalized terms used in this Explanatory Statement have the meanings set forth in Article I of the General Terms and Conditions of the Settlement Agreement. 2 This Explanatory Statement is not intended to, and does not, alter any of the provisions of the Settlement Agreement. In the event of an inconsistency between the Explanatory Statement and the Settlement Agreement, the Settlement Agreement shall control. II. OVERVIEW OF THE SETTLEMENT AGREEMENT The Settlement Agreement provides for the settlement of claims against Settling Supplier arising from events and transactions in Western Energy Markets during the Settlement Period as they are alleged to relate to Settling Supplier. The monetary consideration under this settlement consists of payment of $185, to Settling Supplier, which represents interest that has accrued on Settling Supplier s cash collateral, plus additional interest that will accrue prior to distribution. Subject to certain restrictions, the California Parties will assume Settling Supplier s 2 The Settlement Agreement is Attachment B to the Joint Offer of Settlement. The Settlement Agreement consists of a Cover Sheet, including Exhibit A, and the General Terms and Conditions

14 liabilities and receive an assignment of Settling Supplier s right to refunds and other consideration under other settlements. The occurrence of the Settlement Effective Date requires, among other things, the CPUC s approval and execution of the Settlement Agreement, and the Commission s approval of the Settlement Agreement. The Settlement Agreement permits, but does not require, Participants (i.e., entities that directly sold and/or purchased capacity, energy, and/or ancillary services to or from the ISO and PX markets during the Settlement Period to join the Settling Supplier and the California Parties in the Settlement Agreement as Additional Settling Participants. The Settlement Agreement defines the California Parties and Additional Settling Participants, collectively, as Settling Participants. The rights of those entities electing not to join the Settlement Agreement, Non-Settling Participants, are unaffected by the Settlement Agreement. Such entities will neither receive the benefits of the Settlement Agreement nor be subject to its obligations. No refunds are provided for the California Parties or Additional Settling Participants. Under the Settlement Agreement, obligations that the California Parties (or certain of them will assume, subject to specified limitations, include: (1 any true-up of interest on Settling Supplier s receivables resulting from the FERC Interest Determination; (2 any refund amounts that the Settling Supplier owes to Non-Settling Participants for the Settlement Period; (3 any third-party Refund Offsets (Fuel Cost Allowance, Emissions Offset, and Cost Offset that FERC or a reviewing court determines that Settling Supplier - 4 -

15 owes; (4 Pre-October Period and Refund Period dispute resolution charges; and (5 PX Wind-Up Charges assessed against Settling Supplier after the Settlement Effective Date. Subject to certain limitations, the Settlement Agreement provides for release of the California Parties claims against Settling Supplier and of Settling Supplier s claims against the California Parties for refunds, disgorgement of profits, or other monetary or non-monetary remedies in the FERC Proceedings. The Settlement Agreement similarly provides mutual releases of claims for civil damages and equitable relief. III. DESCRIPTION OF PROCEEDINGS A. The EL00-95 Proceeding, the BPA v. FERC Remand, and the CPUC v. FERC Remand On August 23, 2000, the Commission instituted formal hearing procedures 3 under the Federal Power Act to investigate, among other things, the justness and reasonableness of the rates of public utility sellers into the ISO and the PX markets, and also to investigate whether the tariffs, contracts, institutional structures and bylaws of the ISO and PX were adversely affecting the wholesale power markets in California. 4 The dockets in which these inquiries and proceedings have been conducted (EL00-95 and EL00-98 are defined in the Settlement Agreement as the EL00-95 Proceeding. The Commission issued an initial series of orders 5 in the EL00-95 Proceeding, including a July 25, 2001 Order in which it established the scope of and methodology San Diego Gas & Elec. Co., 92 FERC 61,172 (2000. San Diego Gas & Elec. Co., 97 FERC 61,275 at 62,173 (2001. See San Diego Gas & Elec. Co., 93 FERC 61,294 (2000; San Diego Gas & Elec. Co., 94 FERC 61,245 (2001; San Diego Gas & Elec. Co., 95 FERC 61,115 (2001; (continued - 5 -

16 for calculating refunds related to transactions in the spot markets operated by the [ISO] and the [PX] during the period October 2, 2000 through June 20, The July 25 Order also provided for a hearing. 7 The parties to the EL00-95 Proceeding thereafter litigated issues relating to the scope of refunds and the refund methodology. Presiding Administrative Law Judge ( ALJ Birchman issued his proposed findings of fact regarding refund liability on December 12, 2002, and the Commission issued an order on those proposed findings on March 26, 2003, and subsequent orders on rehearing on October 16, 2003 and May 12, Various parties filed petitions for review of those orders. The United States Court of Appeals for the Ninth Circuit ( Ninth Circuit issued opinions on certain issues, 9 some of which were or may be the subject of separate proceedings, while other issues remain pending on review. On November 19, 2009, the Commission issued an Order on Remand from CPUC v. FERC, setting certain issues for hearing before a FERC ALJ, but suspending those proceedings pending settlement discussions. 10 While settlement discussions continued, 11 San Diego Gas & Elec. Co., 95 FERC 61,418 (2001; San Diego Gas & Elec. Co., 96 FERC 61,120 (2001 ( July 25 Order July 25 Order, 96 FERC at 61,499. Id. at 61,520. See San Diego Gas & Elec. Co., 101 FERC 63,026 (2002, order on review, 102 FERC 61,317 (2003, order on reh g, 105 FERC 61,066 (2003, order on reh g, 107 FERC 61,165 ( City of Redding v. FERC, 693 F.3d 828 (9th Cir (relating to BPA v. FERC Remand; CPUC v. FERC, 462 F.3d 1027, reh g denied, Panel Order, Nos , et al. (9th Cir. Apr. 6, 2009; Bonneville Power Admin. v. FERC, 422 F.3d 908 (9th Cir. 2005, cert. denied, 522 U.S ( San Diego Gas & Elec. Co., 129 FERC 61,147 (

17 an ALJ was designated to preside at the hearing. 12 Subsequently, the procedural schedule was suspended pending Commission action on requests for rehearing. 13 Following the issuance of the order on rehearing, 14 hearing procedures were reinstated, 15 and ALJ Philip C. Baten was designated to preside at the hearing, replacing ALJ Young. 16 The hearing commenced on April 11, 2012, 17 and continued through July 19, During the hearing, ALJ Baten granted Settling Supplier s motion for summary disposition and dismissed Settling Supplier from the proceedings on remand in CPUC v. FERC. 18 The Commission affirmed that dismissal, 19 and the California Parties sought 11 See e.g., Status Report of Settlement Judge Carmen A. Cintron, Docket Nos. EL (Oct. 22, Settlement judge procedures were subsequently terminated. Order of Chief Judge Terminating Settlement Judge Procedures, Docket No. EL (Dec. 21, Order of Chief Judge Ending Stay of Litigation, Continuing Settlement Judge Procedures, Designating Presiding Administrative Law Judge, and Instituting Track II Procedural Time Standards, Docket Nos. EL and -248 (July 16, Order of Chief Judge Temporarily Suspending Modified Track II Procedures, Docket No. EL (Aug. 19, San Diego Gas & Elec. Co., 135 FERC 61,183 (2011, appeal filed sub nom. Cal. ex rel. Harris v. FERC, No (9th Cir. June 2, Order of the Chief [Judge] Reinstating Hearing Procedures, Granting Leave to File Answer to Answer, and Directing the Establishment of a Prehearing Conference, Docket No. EL (June 8, Order of Chief Judge Making Substitute Designation of Presiding Administrative Law Judge, Docket Nos. EL and -248 (Nov. 18, Order Amending [Order] Setting Procedural Schedule, Hearing and Rules of Conduct, Docket No. EL (Jan. 11, San Diego Gas & Elec. Co., 140 FERC 63,015 (2012. San Diego Gas & Elec. Co., 141 FERC 61,088 P 23 (

18 rehearing, 20 which the Commission denied. 21 That decision is now on appeal, 22 and the California Parties have moved to intervene in the appeal. 23 B. The EL01-68 Proceeding On April 26, 2001, the Commission established Docket No. EL01-68, in which it instituted an investigation into the reasonableness of the rates for wholesale sales in the spot markets in the Western Systems Coordinating Council ( WSCC. 24 In that same order, the Commission also established a prospective mitigation and monitoring plan for the wholesale markets that the ISO operated. 25 On June 19, 2001, on rehearing of the April 26 Order, the Commission modified the mitigation plan and extended price mitigation to wholesale spot markets throughout the WSCC. 26 FERC dismissed in part and denied in part a June 9, 2009 motion that the California Parties filed in that docket for refunds on sales to CERS during the period June 20, 2001 through December 19, California Parties Request for Clarification and Rehearing of Order Affirming Findings in Partial Initial Decision and rejecting Request for Market-Wide Remedy, Docket No. EL00-95 (Dec. 3, San Diego Gas & Elec. Co., 153 FERC 61,144 P 190 (2015. MPS Merch. Svcs., Inc. v. FERC, Case No (9 th Cir. California Parties Motion for Leave to Intervene, Case No (Mar. 28, San Diego Gas & Elec. Co., 95 FERC 61,115 (2001 ( April 26 Order. Id. San Diego Gas & Elec. Co., 95 FERC 61,418 (2001. Investigation of Wholesale Rates of Pub. Util. Sellers of Energy and Ancillary Servs. in the WSCC, 135 FERC 61,176 (2011, reh g denied, 138 FERC 61,251 (2012, appeal filed sub nom. Cal. ex rel. Harris v. FERC, No (9th Cir. Apr. 4, This appeal is set for briefing in

19 C. The EL02-71 Proceeding The EL02-71 Proceeding was initiated on March 20, 2002, when Bill Lockyer, then Attorney General for the State of California ( AG, filed a complaint alleging that the Commission had failed to properly authorize and administer power sellers marketbased rate tariffs during the time period. The Commission dismissed and/or denied the majority of the AG s complaint. 28 The AG petitioned for review of the Commission s decisions, and the Ninth Circuit remanded the case for further proceedings. 29 On March 21, 2008, the Commission issued an order on remand, 30 and settlement judge procedures were initiated. 31 On April 21, 2009, Judith A. Dowd was designated Presiding ALJ. On March 18, 2010, ALJ Dowd issued an Initial Decision, granting summary disposition to movant suppliers. 32 The Commission affirmed Judge Dowd s Initial Decision on May 4, 2011, 33 and the California Parties sought rehearing. On June 13, 2012, the Commission denied rehearing and the California Parties ( See Cal. ex rel. Lockyer, 99 FERC 61,247, order on reh g, 100 FERC 61,295 Cal. ex rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004, cert. denied, 551 U.S ( Cal. ex rel. Lockyer, 122 FERC 61,260, order on clarification, 123 FERC 61,042, order on reh g and clarification, 125 FERC 61,016 (2008, appeal filed sub nom. Cal. ex rel. Brown v. FERC, No (9th Cir. Oct 14, This appeal is set for briefing in Cal. ex rel. Lockyer, 122 FERC 61,260 at P 35. Settlement judge procedures were terminated on July 16, Order of Chief Judge Terminating Settlement Judge Procedures, Docket No. EL (July 16, Cal. ex rel. Lockyer, 130 FERC 63,017 (2010. Cal. ex rel. Lockyer, 135 FERC 61,113 (

20 subsequently filed a petition for review in the Ninth Circuit. 34 On April 29, 2015, the Ninth Circuit granted the California Parties petition and remanded the case to the Commission for further proceedings on whether reporting violations masked manipulation or market power. 35 The Commission issued its Order on Remand in Lockyer 36 on November 3, The Order on Remand established settlement procedures, appointing ALJ Dawn Scholz as settlement judge, to be followed by a trial. Settlement proceedings remain underway and are scheduled to terminate on August 18, Settling Supplier, the California Parties and others petitioned for rehearing of the Commission s order on remand in Lockyer. 38 The Commission issued an Order on Rehearing and Clarification in which it granted clarification on certain issues raised by petitioners for rehearing and dismissed the rehearing requests as moot Cal. ex rel. Lockyer, 139 FERC 61,211 (2012, appeal filed sub nom. Cal. ex rel. Harris v. FERC, No (9th Cir. June 20, Cal. ex rel. Harris v. FERC, 2015 WL (9th Cir. Apr. 29, Cal. ex rel. Lockyer, 153 FERC 61,137 (2015 ( Order on Remand. The Order on Remand refers to the litigation as the remand in Harris, the name of the current California Attorney General, which is the nomenclature that the Ninth Circuit Court of Appeals used. For avoidance of confusion, this Joint Explanatory Statement will refer to the proceedings as Lockyer. 37 Judge Scholz issued this order orally during a settlement status conference held on June 30, Request of Mieco, Inc. for Rehearing, Docket No. EL02-71 (Dec. 3, Cal. ex rel. Lockyer, 154 FERC 61,154 (

21 On March 10, 2016, the California Parties filed a Petition for Review at the United States Court of Appeals for the Ninth Circuit, seeking judicial review of the Order on Remand and a subsequent Order on Clarification and Rehearing. 40 D. The PA02-2 Proceeding On February 13, 2002, the Commission instituted Docket No. PA , in which it directed its Staff to commence a fact-finding investigation of manipulation of electricity and natural gas prices in the West. 41 On March 26, 2003, Commission Staff issued its Final Report on Price Manipulation in Western Markets ( Final Staff Report. 42 E. The IN03-10 Proceeding On June 25, 2003, the Commission issued an order in Docket No. IN responding to the recommendation that the ISO and PX tariffs Market Monitoring and Information Protocols ( MMIP be found to prohibit the bidding behavior discussed in the Final Staff Report. 43 The Commission directed its Office of Market Oversight and Investigation ( OMOI to conduct a non-public investigation at the individual market participant level, and to examine all bids in the ISO and PX markets above $250/MWh in order to determine whether parties may have violated the MMIP s prohibition against Cal. ex rel. Harris v. FERC, Case No Fact-Finding Investigation of Potential Market Manipulation of Electric and Natural Gas Prices, 98 FERC 61,165 ( Fact-Finding Investigation of Potential Market Manipulation of Electric and Natural Gas Prices, Docket No. PA02-2, Final Report on Price Manipulation in Western Markets (March Investigation of Anomalous Bidding Behavior and Practices in the Western Markets, 103 FERC 61,347 (

22 anomalous market behavior. 44 OMOI investigated each entity that bid above $250/MWh in the ISO and PX markets to determine whether it may have violated the provision of the MMIP prohibiting anomalous bidding behavior. 45 The Commission also directed OMOI to conduct a non-public investigation into the existence of any physical withholding of power by California generators during the period May 1, 2000 through June 20, F. ISO Re-Run Proceeding On April 15, 2003, the ISO filed with FERC Amendment No. 51 to its tariff. 47 The ISO proposed to conduct a Preparatory Rerun in preparation for the Commissionmandated market rerun in the EL00-95 Proceeding and requested approval of tariff amendments to wall off that rerun from the settlement processes used to clear the ISO market. 48 On June 13, 2003, the Commission issued an order conditionally accepting and suspending Amendment No. 51, subject to refund. 49 Subsequently, the Commission Id. at 62,359. See, e.g., Investigation of Anomalous Bidding Behavior and Practices in the Western Markets, 110 FERC 61,369 (2005 (describing certain OMOI determinations and the California Parties request for rehearing of same, appeal filed sub nom. Pac. Gas. and Elec. Co., Nos , et al. (9th Cir. Apr. 27, These appeals are set for briefing in On August 1, 2003, OMOI issued an undocketed Initial Report on Physical Withholding by Generators Selling into the California Market and Notification to Companies FERC assigned Docket No. ER to this filing. Amendment No. 51 Transmittal Letter at 3 & n.4. Cal. Indep. Sys. Operator Corp., 103 FERC 61,331 (

23 directed the ISO to submit monthly reports detailing the status of the rerun and the settlement and billing activities for calculating refunds. 50 The ISO submitted an updated compliance filing on April 16, 2010, and the PX submitted a compliance filing on May 4, 2010 and a supplemental compliance filing on October 6, On July 15, 2011, the Commission accepted the compliance filings of both the PX and the ISO, to which the California Parties requested rehearing and, following Commission denial of rehearing, they filed a petition for review. 51 G. The EL01-10 Proceeding On October 26, 2000, Puget Sound Energy, Inc. filed a complaint asking the Commission to cap the prices at which sellers subject to the Commission s jurisdiction could sell energy or capacity in the Pacific Northwest s wholesale power markets. On December 15, 2000, the Commission dismissed the complaint, 52 but subsequently ordered a preliminary evidentiary hearing to develop a factual record on whether there may have been unjust and unreasonable charges for spot market bilateral sales in the Pacific Northwest for the period December 25, 2000 through June 20, After conducting the preliminary evidentiary hearing, the ALJ found that no refunds were 50 Cal. Indep. Sys. Operator Corp., 106 FERC 61,099 (2004. On February 14, 2014, the ISO submitted its Forty-Seventh Status Report on Settlement Re-Run Activity in Docket Nos. ER03-746, et al. 51 San Diego Gas & Elec. Co., 136 FERC 61,036 (2011, reh g denied, 138 FERC 61,092 (2012, appeal filed sub nom. Cal. ex rel. Harris v. FERC, No (9th Cir. Feb 9, This appeal is set for briefing in San Diego Gas & Elec. Co., 93 FERC 61,294 (2000. San Diego Gas & Elec. Co., 96 FERC 61,120 (

24 merited for sales in the Pacific Northwest during the period at issue and that requests for relief for CERS purchases were outside the scope of the proceeding. 54 On June 25, 2003, the Commission adopted the ALJ s recommendations that refunds be denied and that CERS purchases be excluded. The Commission also denied rehearing of the dismissal of the complaint. 55 Various parties sought judicial review of these FERC orders, and on August 24, 2007, the Ninth Circuit found that FERC erred when it excluded from the proceeding claims relating to CERS purchases and when it failed to consider evidence of market manipulation in determining whether prices were just and reasonable under the Federal Power Act. 56 On October 3, 2011, the Commission established a hearing on remand but held hearing procedures in abeyance pending settlement judge procedures. 57 On May 25, 2012, the Chief Judge terminated settlement judge procedures for some parties and designated an ALJ. 58 On August 23, 2012, the California Parties, on behalf of CERS, filed with the Commission a disclosure of claims against certain parties, including Settling Supplier. However, the California Parties filed no testimony supporting a claim against Settling Supplier, and on October 18, 2012 filed a Stipulation for Dismissal of Puget Sound Energy, Inc., 96 FERC 63,044 (2001. Puget Sound Energy, Inc., 103 FERC 61,348, reh g denied, 105 FERC 61,183 (2003, reh g denied, 106 FERC 61,109 ( Port of Seattle v. FERC, 499 F.3d 1016 (9th Cir. 2007, reh g denied, Panel Order, Nos , et al. (9th Cir. Apr. 9, 2009, cert. denied, 130 S. Ct ( Puget Sound Energy, Inc., Order on Remand, 137 FERC 61,001 ( Order of Chief Judge Terminating Settlement Judge Procedures as to Some Parties; Continuing Settlement Judge Procedures as to Other Parties; Designating Presiding Administrative Law Judge; and Delaying Track II Procedures for 45 Days, Docket Nos. EL , et al. (May 25,

25 Mieco Inc., providing that Mieco shall no longer be considered a respondent in this proceeding, but reserving the right to seek relief from Mieco if the Commission or a "reviewing court permits a market-wide remedy" as requested by the California Parties in prior rehearing request. A hearing before ALJ McCartney commenced on August 27, 2013, and continued through October 24, Initial Briefs were filed on December 16, 2013, and Reply Briefs on January 28, Judge McCartney issued her Initial Decision on March 28, On May 22, 2015, the Commission issued an Order on Initial Decision, which directed the Presiding Judge to issue a revised partial Initial Decision on certain issues with respect to the California Parties claims against one party. 60 That proceeding is still pending before the Presiding Judge. IV. DESCRIPTION OF SETTLING SUPPLIER Mieco is a company, based in Long Beach, California, which for a brief period engaged in wholesale power sales. From January 1, 2000 to January 17, 2001, Mieco made no sales of ancillary services in the California Markets and sold virtually no power in the California real-time market. Instead, Mieco sold power on a Day-Ahead basis. Governor Gray Davis, on January 17, 2001, issued a Proclamation of Emergency and tasked the California Department of Water Resources ( CDWR to purchase power for the financially distressed independently owned utilities. CDWR made direct and personal pleas for help to Mieco, and Mieco agreed Puget Sound Energy, Inc., 146 FERC 63,028 (2014. Puget Sound Energy, Inc., 151 FERC 61,173 (

26 Mieco helped CERS create an energy trading desk. In fact, under Volunteer Service Agreements entered into with the State of California, Mieco loaned two employees to CERS. Mieco paid the salary, lodging, and travel expenses for these employees. Mieco was the only company to provide the State with volunteers to help during the energy crisis. In recognition of Mieco s help, CDWR provided Mieco with a letter of commendation praising Mieco for its help and corporate integrity. Mieco is the only seller during the California energy crisis to receive such a letter. V. SUMMARY OF SETTLEMENT AGREEMENT TERMS The principal terms of the Settlement Agreement are briefly described below, with reference to the sections of the Settlement Agreement that contain them. A. Effective Date The Parties have executed the Settlement Agreement and it became binding as of the Execution Date. Some of the provisions, however, become effective as of, or in relation to, the Settlement Effective Date. Section 2.2. The Settlement Effective Date is defined as the sixth Business Day following the date on which FERC issues the FERC Settlement Order approving the Settlement Agreement, regardless of whether such order is subject to rehearing or appeal, provided that such order has not been stayed pending such rehearing or appeal, subject to certain conditions in the event that the Commission modifies or conditions its approval of the Settlement Agreement. Sections 1.33, 1.34, 1.65,

27 B. Termination The Settlement Agreement shall terminate on the date of a Final Order rejecting the Settlement Agreement in whole or in material part or accepting it with material conditions or modifications unacceptable to any adversely affected Party. Section 2.3. C. Time Period The Settlement Agreement relates to the period January 1, 2000 through June 20, 2001 ( Settlement Period. Section D. Participant Ability to Opt In to the Settlement Agreement Any entity that directly sold capacity, energy, and/or ancillary services to, or purchased capacity, energy, and/or ancillary services from, the ISO and/or PX markets during the Settlement Period ( Participant may elect to be bound by the terms of the Settlement Agreement as an Additional Settling Participant. Sections 1.1, 1.47, and 8.1. To opt in to the Settlement Agreement, a Participant must provide notice to the Commission and serve it on the parties on the ListServ established for the EL00-95 Proceeding and the ListServ established in Docket Nos. EL03-137, et al., no later than five Business Days following the Settlement Effective Date. Section 8.1. If a Participant does not opt in to the Settlement Agreement ( Non-Settling Participant : (i its rights will be unaffected by the Settlement Agreement; (ii it will have no right to obtain certain benefits of the Settlement Agreement; and (iii it will be paid the refunds, if any, to which it is ultimately determined to be due through continued litigation. Sections 1.45, 3.2, 5.5, and

28 E. Monetary Consideration The monetary consideration flowing to Settling Supplier under the Settlement Agreement totals $185, before final adjustments. Cover Sheet Item That amount, as adjusted for accrued interest, reflects interest that has accrued on Settling Supplier s cash collateral. Cover Sheet Item and Section Settling Supplier will assign to the California Parties its entitlement to refunds on certain purchases made in the California Markets during the Settlement Period. Sections and Under the settlement, the California Parties (or certain of them will assume responsibility for, subject to specified limitations, the obligation for (a any true-up of interest on Settling Supplier s receivables resulting from the FERC Interest Determination, (b any refund amounts that Settling Supplier owes to Non-Settling Participants in the FERC Proceedings, (c any third-party Refund Offsets (Fuel Cost Allowance, Emissions Offset, and Cost Offset that FERC or a reviewing court determines that Settling Supplier owes, (d dispute resolution charges for the Pre-October Period and the Refund Period, and (e any PX Wind-Up Charges assessed against Settling Supplier after the Settlement Effective Date. Sections 4.1.3, 4.1.4, 5.2, and 5.4. F. Disposition and Allocation of Settlement Proceeds The Settlement Agreement provides for the settlement of claims against Settling Supplier arising from events and transactions in Western Energy Markets during the Settlement Period as they relate to Settling Supplier. Article VII. The only proceeds of the settlement are (i interest that has accrued on Settling Supplier s cash collateral, plus interest that accrues in the PX cash collateral account through the date of distribution, all

29 of which is paid to Settling Supplier, and (ii refunds from other settlements, which are assigned to the California Parties. No provision is made for refunds to Settling Participants. The obligation of any of the California Parties to make payments on behalf of Settling Supplier under the Settlement Agreement shall not exceed the total amount that Settling Supplier would have received in refunds had there been no other global settlements of refund claims. Section 5.4. G. ISO and PX Accounting Upon occurrence of the Settlement Effective Date, the Commission s approval of the Settlement Agreement will constitute the Commission s authorization and direction to the ISO and PX to conform their books and records to reflect the distributions, offsets, adjustments, transfers, and status of accounts provided for in the Settlement Agreement. Section 6.1. H. Releases and Waivers In return for the specified consideration, and subject to specified limitations, the Settlement Agreement resolves all claims as between the California Parties, on the one hand, and Settling Supplier, on the other hand, relating to transactions in Western Energy Markets during the Settlement Period for damages, refunds, disgorgement of profits, costs and attorneys fees, or other remedies. Sections 3.1 and Subject to certain specified limitations, the Settlement Agreement provides for the California Parties and Settling Supplier mutually to release and discharge each other as of the Settlement Effective Date and completion of the transfers of consideration provided

30 for in Sections and , from all existing and future claims before FERC and/or under the Federal Power Act for the Settlement Period that: (i (ii (iii Settling Supplier or any California Party charged or collected unjust, unreasonable, or otherwise unlawful rates, terms or conditions for electric capacity, energy, ancillary services, or transmission congestion in the Western Energy Markets during the Settlement Period; Settling Supplier or any California Party manipulated the Western Energy Markets in any fashion (including, but not limited to, claims of economic or physical withholding, gaming, forms of electricity market manipulation discussed in the [Final Staff Report], or any other forms of electricity market manipulation, or otherwise violated any applicable tariff, regulation, law, rule, or order relating to the Western Energy Markets during the Settlement Period; or any California Party is liable for payments to Settling Supplier for congestion charges, transmission line losses, energy, or ancillary services during the Settlement Period. Section The Settlement Agreement also provides, subject to certain specified limitations, for the California Parties and Settling Supplier mutually to release the other from all past, existing, and future claims for civil damages and/or equitable relief concerning, pertaining to, or arising from allegations that: (i (ii Settling Supplier or any California Party charged or collected unjust, unreasonable, or otherwise unlawful rates, terms or conditions for electric capacity, energy, ancillary services, or transmission congestion in the Western Energy Markets during the Settlement Period; Settling Supplier or any California Party, during the Settlement Period, manipulated Western Energy Markets in any fashion (including, but not limited to, claims of economic or physical withholding, gaming, forms of market manipulation discussed in the Final Staff Report, or any other forms of market manipulation;

31 (iii (iv Settling Supplier or any California Party was unjustly enriched by the foregoing released claims or otherwise violated any applicable tariff, regulation, law, rule, or order relating to transactions in the Western Energy Markets during the Settlement Period; or any California Party is liable for payments to Settling Supplier for congestion charges, transmission line losses, energy, or ancillary services during the Settlement Period. Section Subject to the limitations of Sections 7.4 and 8.2, Participants that elect to participate in the Settlement as Additional Settling Participants are deemed to provide to and receive from Settling Supplier the releases that the California Parties provide and receive. Sections 7.4 and 8.2. VI. HOLD HARMLESS ASSURANCES FOR THE ISO AND PX In prior orders approving settlements in the FERC Proceedings, the Commission has provided the ISO and PX with hold harmless assurances for the steps taken to implement those settlements. See, e.g., San Diego Gas & Elec. Co., 135 FERC 61,059 at P 19 (2011 (approving hold harmless protection for the ISO and PX in connection with the Sacramento Municipal Utility District settlement. The California Parties and the Settling Supplier do not oppose Commission action to provide similar assurances to the ISO and PX with respect to the Settlement Agreement. August 24,

32 Attachment B

33 Settling Supplier: Mieco Inc. SETTLEMENT AND RELEASE OF CLAIMS AGREEMENT COVER SHEET This Settlement and Release of Claims Agreement ( Agreement is entered into by and among Settling Supplier and each of the California Parties. Settling Supplier and each of the California Parties is a Party, and collectively they are Parties to this Agreement. RECITALS A. Whereas, various of the Parties are interested or engaged in complex and disputed regulatory proceedings, appellate proceedings, litigation, and investigations regarding numerous issues and allegations arising from events in the Western Energy Markets during the years 2000 and 2001; B. Whereas, the Parties and the Additional Settling Participants have determined that it is preferable to settle the disputes addressed herein rather than continue to litigate; C. Whereas, the California Parties are willing to accept certain risks in light of the level of consideration to be paid to the California Parties as set forth below; and D. Whereas, Settling Supplier seeks a resolution, closure, and an end to disputes with each and all of the California Parties in regard to issues and allegations arising from the events in the Western Energy Markets during the Settlement Period in exchange for consideration, and subject to the limitations, as described herein. Now, therefore, in consideration of the mutual covenants and agreements, and other good and valuable consideration provided for herein, and subject to and upon the terms and conditions hereof, the Parties agree as follows: This Agreement consists of this Cover Sheet, including Exhibit A hereto, together with the attached General Terms and Conditions, which are incorporated herein by reference. The Items identified below correspond to sections of the General Terms and Conditions. Capitalized terms that are not defined in this Cover Sheet shall have the meanings set forth in the General Terms and Conditions. Item Description 1.25 Execution Date: August 19, 2016

34 1.69 Settling Supplier: Mieco Inc Date of Cash Collateral Amount: March 31, 2016 Unadjusted Cash Collateral (principal plus interest to be paid to Settling Supplier: $185, Notice to Settling Supplier: Richard Lowell Mieco Inc. Shoreline Square 301 East Ocean Boulevard Suite 1100 Long Beach, California Telephone: ( FAX: ( With a copy to: Steven A. Weiler Stinson Leonard Street LLP 1775 Pennsylvania Avenue NW, Suite 800 Washington, DC Tel: ( steve.weiler@stinson.com IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized officers or representatives as of the dates set forth under their respective signatures. [SIGNATURES APPEAR ON THE PAGES THAT FOLLOW] Cover Sheet - 2 -

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42 EXHIBIT A PRIOR SETTLEMENTS Part A Settlement agreements requiring the agreement of the California Parties only to opt in out of time: 1. The Dynegy Parties, as approved by FERC in San Diego Gas & Elec. Co., 109 FERC 61,071 (2004 and San Diego Gas & Elec. Co., 148 FERC 61,128 (2014 (settlement amendment; 2. The Enron Parties, as approved by FERC in San Diego Gas & Elec. Co., 113 FERC 61,171 (2005, and as later amended, San Diego Gas & Elec. Co., 119 FERC 61,135 (2007; 3. City of Vernon, California, as approved by FERC in San Diego Gas & Elec. Co., 125 FERC 61,085 (2008; 4. City of Los Angeles acting by and through the Department of Water and Power, as approved by FERC in San Diego Gas & Elec. Co., 129 FERC 61,257 (2009; 5. Cargill Power Markets, LLC (f/k/a Cargill-Alliant, LLC, as approved by FERC in San Diego Gas & Elec. Co., 129 FERC 61,258 (2009; 6. PECO/Exelon, as approved by FERC in San Diego Gas & Elec. Co., 129 FERC 61,259 (2009; 7. Public Service Company of New Mexico, as approved by FERC in San Diego Gas & Elec. Co., 131 FERC 61,082 (2010; 8. Northern California Power Agency, as approved by FERC in San Diego Gas & Elec. Co., 131 FERC 61,083 (2010; 9. Tucson Electric Power Company, as approved by FERC in San Diego Gas & Elec. Co., 131 FERC 61,259 (2010; - 1 -