Judge says regulators can't order refunds from California-owned utilities

The decision takes up to $1 billion in potential refunds "off the table," said Tom Dresslar, spokesman for California Attorney General Bill Lockyer.

"It's a setback," added Erik Saltmarsh, head of the state Electricity Oversight Board.

He and Dresslar said it wasn't clear what actions the state would take in response to the court's ruling.

The case involved the Federal Energy Regulatory Commission's authority over major government-owned power sellers such as the Los Angeles Department of Water and Power, the federal Bonneville Power Administration and smaller entities like the Sacramento Municipal Utility District.

All sold electricity to the state during the energy crisis, although their sales didn't generate as much attention as deals made by the for-profit energy companies.

Three years ago FERC found that the sellers were liable for refunds but hadn't yet put a price tag on how much they owed.

On Tuesday the U.S. 9th Circuit Court of Appeals in San Francisco said FERC lacked the power to order the government agencies to make any refunds. The court acknowledged "the impact our decision may have on the overall refunds claimed by California ratepayers."

Dresslar and Saltmarsh said Bonneville and Los Angeles would have owed the lion's share of the government agencies' refunds, totaling hundreds of millions of dollars. Smaller entities such as SMUD would have owed several million dollars each, they said.

Los Angeles officials, however, said the potential refund they owed would have been as little as $50 million. They, like other power sellers, said they've done nothing wrong.

"We would certainly take issue (with allegations) that we overcharged anybody," said Jim Shetler, SMUD assistant general manager.

Bonneville, a federally owned network of hydroelectric dams based in Portland, Ore., said it sold power to California at below-market prices.

"We were not gouging," said spokesman Ed Mosey.

Ironically, the case put the state on the same side as FERC, an agency that California officials believe has been unsympathetic to California's cause. "One of the few times we agreed with FERC, and the 9th Circuit slams us," Dresslar said.

But FERC spokesman Bryan Lee said his agency hasn't been unsympathetic to California. It's simply been limited by federal law in how it treats California's refunds demands, and Tuesday's ruling is another example of that, he said.

He said the energy bill signed recently by President Bush gives FERC the authority to order those refunds. But that only applies to future refunds, he said.

It marked the second time in about a week that California's refund effort hit a roadblock. A federal judge dismissed the state's lawsuit accusing a Canadian power seller of price gouging.

Nevertheless, the state has obtained settlements totaling about half of the $9 billion it says it was owed by electricity suppliers for overcharges in 2000 and 2001.