Aug. 24 (Bloomberg) -- The Federal Energy Regulatory Commission must reconsider its denial of refunds to wholesale customers of Powerex Corp. and other electric companies in the Pacific Northwest during the 2000-2001 California energy crisis.

FERC must review rejected claims by cities including Seattle and Tacoma, Washington, the U.S. Court of Appeals in San Francisco ruled today. It also ordered the agency to reconsider its decision to exclude from refund consideration power bought on the Pacific Northwest spot market for use in California.

``FERC abused its discretion in denying potential relief for transactions involving energy that was ultimately consumed in California,'' U.S. Circuit Judge Sydney Thomas wrote. ``In determining whether refunds were warranted, FERC should have considered new evidence of intentional market manipulation.''

The agency has already approved $6.4 billion in settlements of California claims that power sellers gouged the state during the energy crisis, when power prices rose 10-fold, businesses and consumers endured rolling blackouts and the state's two largest utilities became insolvent.

As a result of today's decision, California can now potentially claim $1.3 billion in refunds, Attorney General Jerry Brown said in a statement.

$2 Billion Sought

California wants a $1 billion refund from Powerex, a marketing subsidiary of British Columbia Hydro & Power Authority, said Eric Saltmarsh, executive director of the California Electricity Oversight Board. It's the state's biggest outstanding claim in the Northwest.

California initially sought a total of about $2 billion in refunds for Northwest purchases, part of which has been settled, Saltmarsh said.

Other companies from which the state is seeking refunds include Sempra Energy, TransAlta Corp., Royal Dutch Shell Plc's Coral Power unit and TransCanada Corp., the attorney general said.

Gilliam Robinson, a spokeswoman for Vancouver-based British Columbia Hydro, didn't immediately return a call for comment. FERC spokeswoman Tamara Young-Allen declined to immediately comment.

The U.S. Supreme Court, in June, refused to consider arguments by energy companies that FERC lacked the authority to order retroactive refunds for energy sales in 2000 and 2001.

The case is Port of Seattle et al v. Federal Energy Regulatory Commission, 03-74139, U.S. Circuit Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

Last Updated: August 24, 2007 21:53 EDT