8-KOther Events

WILLIAMS COMPANIES, INC. 8-K Report (Mar 16, 2001)

Filed March 16, 2001For Securities:WMB

Summary

The Williams Companies, Inc. (WMB) has filed an 8-K report concerning a Show Cause Order issued by the Federal Energy Regulatory Commission (FERC) on March 14, 2001. The order pertains to Williams Energy Marketing & Trading (WEM&T), a subsidiary, and AES Southland, Inc. (AES), regarding alleged violations of reliability must-run (RMR) contracts and tariffs. Specifically, the FERC is investigating whether these entities failed to provide power from designated RMR generation units in Orange County, California, during April and May 2000. The FERC has proposed two potential remedies: a refund of approximately $10.8 million by WEM&T and/or AES to the California Independent System Operator (ISO) for revenues deemed in excess of what would have been collected under normal circumstances, and a one-year restriction on WEM&T's market-based rate authority. This restriction would mean that if an RMR unit is unavailable when dispatched, a replacement non-RMR unit would only receive payment according to the RMR contract terms, exposing WEM&T to potential financial risk. The company strongly believes it did not violate any contracts or tariffs and intends to contest the FERC's findings and proposed remedies vigorously.

Key Highlights

  • 1FERC issued a Show Cause Order to WMB's subsidiary, Williams Energy Marketing & Trading (WEM&T), and AES Southland, Inc.
  • 2The order relates to alleged violations of reliability must-run (RMR) contracts and tariffs concerning power generation in Orange County, California, during April-May 2000.
  • 3FERC is questioning whether WEM&T and AES failed to provide power from designated RMR generation units.
  • 4Potential remedies include a refund of approximately $10.8 million to the California ISO.
  • 5A second potential remedy involves a one-year restriction on WEM&T's market-based rate authority, potentially putting WEM&T at financial risk.
  • 6Williams Companies Inc. believes it did not violate any contracts or tariffs and intends to contest the FERC's findings.
  • 7The company is committed to vigorously defending its position against the proposed remedies.

Frequently Asked Questions

The main issue is a Show Cause Order issued by the Federal Energy Regulatory Commission (FERC) to Williams Energy Marketing & Trading (WEM&T), a subsidiary of The Williams Companies, Inc., and AES Southland, Inc. The order questions whether these entities violated certain reliability must-run (RMR) contracts and tariffs by failing to provide power from specific generation units in California during April and May 2000.

The FERC has proposed two potential remedies. The first is a refund of approximately $10.8 million to the California Independent System Operator (ISO). The second is a one-year restriction on WEM&T's market-based rate authority, which could expose WEM&T to financial losses if a dispatched RMR unit fails and a replacement is needed.

The Williams Companies, Inc. believes that WEM&T did not violate any applicable contracts or tariffs. The company intends to vigorously contest the FERC's findings and any imposed remedies, stating it will pursue its position strongly.

A reliability must-run (RMR) contract is an agreement where a power generator is obligated to be available and provide power when dispatched by the grid operator (in this case, the California ISO) to ensure the reliability of the electricity grid. These contracts typically have specific terms regarding availability, payment, and penalties for non-compliance.