Judge blasts FERC, renounces power dispute

By Denny Walsh Bee Staff Writer (Published April 10, 2001) A Sacramento federal judge Monday bowed out of the bitter financial dispute between energy generators and their California buyers but not before he leveled a blast at the performance of federal regulators.

The blistering remarks came as Gov. Gray Davis' spokesman, Steve Maviglio, said the federal government stance could add $5 million to $8 million more a day to the state's power purchases for its two largest utilities this summer.

The cost will rise substantially during periods of high demand in summer unless the state fights rulings last week by a federal appeals court and the Federal Energy Regulatory Commission, Maviglio said, adding that no decisions have been made on appeals.

U.S. District Judge Frank C. Damrell Jr. canceled Thursday's hearing on a motion by the state's transmission grid operator to amend its lawsuit against one of the nation's major energy suppliers.

Citing Friday's ruling by FERC that cash-strapped buyers of emergency power must be able to pay for it, no matter how dire California's energy crisis becomes, Damrell said in a short but stinging order that further action in his court would be "futile."

The 9th U.S. Circuit Court of Appeals, hinting at jurisdictional problems, stayed Damrell's injunction forcing Reliant Energy Services to sell emergency power to the Independent System Operator. The ISO then sought to convert its suit to breach-of-contract litigation in an attempt to overcome the appellate court's concerns.

As he backed out of the brawl Monday, Damrell accused FERC of dragging its feet and talking out of both sides of its mouth.

Meanwhile, the state Department of Water Resources, which has been acquiring energy since Jan. 19 with the backing of legislative appropriations, is "buying the power necessary to keep the lights on," said Ray Hart, the department's deputy director.

And three top state lawmakers will travel to Boise, Idaho, today to attend a FERC hearing on price volatility in the West. They will ask the commissioners to impose a temporary price cap on wholesale electricity in Western states.

In a March 21 injunction, Damrell ordered Reliant to continue selling emergency power to ISO, even though it would not be paid for purchases on behalf of Pacific Gas and Electric Co., which has filed for bankruptcy protection, and Southern California Edison Co., also heavily in debt.

Reliant said its agreement with the ISO requires buyers to be creditworthy and sought to back away from the two investor-owned utilities. The ISO sued to halt the retreat of the Houston-based firm along with other generators.

FERC issued an order Feb. 14 generally siding with generators on the creditworthiness question.

FERC on Friday said the ISO "misinterpreted our order." It "required a creditworthy counterparty, such as the California Department of Water Resources." That did not please Damrell.

In his Monday order, the judge wrote that FERC said Feb. 14 it would address the creditworthiness question as it applies to emergency purchases in the future. "The FERC explicitly acknowledged this fact five days ago in a brief" submitted to the 9th Circuit challenging the March 21 injunction, he said.

The judge said it was FERC's own words in the Feb. 14 order that he relied on in issuing an injunction pending the agency's decision on creditworthiness.

The Bee's Denny Walsh can be reached at (916) 321-1189 or dwalsh@sacbee.com.

http://www.capitolalert.com/news/capalert05_20010410.html

-- Martin Thompson (mthom1927@aol.com), April 10, 2001