Ferc Moves to End Calif. Power Quarrel

LOS ANGELES - -- A regulatory judge has ordered an expedited hearing on the amount of money to be refunded to California for power the state was forced to purchase at inflated prices during last winter's red-hot seller's market.

An administrative law judge with the Federal Energy Regulatory Commission ordered a hearing to be held no later than 45 days after the California Independent System Operator (ISO) submits the historical data backing up the state's claims for nearly $9 billion in alleged overcharges it wants refunded.

Michael Kahn, chairman of the ISO, said Judge Bruce Birchman's decision validated California's claims that it had been gouged by the power-generating companies that sold electricity on the volatile spot market between Oct. 2 and June 20.

"Today's decision is a significant victory for California and a validation of our collective efforts to establish that significant refunds are due to California," Kahn said. "The FERC accepted our methodology, rejected the notion of prolonging the matter by 60 days ... and established the groundwork for refunding a substantial portion of the $8.9 billion Californians are owed."

FERC Chairman Curt Hebert, a stanch opponent of any kind of price controls on the wholesale electricity market, said Birchman's decision would lead to a clearing up of an increasingly sticky mess in California.

"At some point, regulatory and investment uncertainty in California and the West must end," he declared. "Today's order helps to end that uncertainty and bring some sense of order to a chaotic market."

The likelihood that California will see $8.9 billion appears slim, however, in light of a July 12 report by another FERC judge who determined that while overcharges had occurred, the amount ultimately refunded would probably not be much above $1 billion.

Some power producers have said refunds were not justified at all because the higher price of natural gas pushed their production costs higher, and the deteriorating credit of California's utilities made it necessary to charge the state an additional premium. Executives have also complained that they should not have to pay refunds to California when the state still owes them hefty sums for earlier power purchases.

Negotiations between the state and the power producers earlier this summer failed to come up with a compromise figure as both sides drew a line in the sand and stuck to their respective positions.

Gov. Gray Davis on Wednesday repeated his vow that the state would get the full $8.9 billion, if not from FERC, then through a lawsuit.

"As for the energy profiteers and pirates, let me make it clear that I will not rest until every dollar gouged from California businesses and residents is returned to California," Davis vowed in a news release. "If the FERC does not make California whole, we will see you in court."