Energy Talks End With No Settlement (AP) 7.09.01, 6:55p --

Talks between California power users and providers ended Monday with no resolution but an administrative judge said the state is probably owed no more than $1 billion, far less than the nearly $9 billion officials have sought.

"The numbers were too far apart," said Curtis Wagner, the Federal Energy Regulatory Commission chief administrative law judge. Wagner served as a mediator during the 15 days of negotiations and will recommend a settlement to FERC by next Monday.

He placed the refunds owed the state at between $716 million and $1 billion. Power providers had offered $716 million as part of an overall settlement, while California state officials sought $8.9 billion, Wagner said.

The judge indicated that California may actually receive no refunds because power providers may be owed more than they have to return for overcharges.

Separately, Wagner split off claims of overcharges from the Pacific Northwest, saying he has not had the time to consider those allegations under the short timetable ordered by FERC last month.

While Wagner said California officials had not made the case for $8.9 billion in refunds, a spokesman for Gov. Gray Davis said the state would pursue its claims in court, and could ask for $20 billion.

"I think we have demonstrated very clearly both to the FERC and to the judge that the state is owed $8.9 billion and will settle for nothing less," Davis spokesman Roger Salazar said.

Power generators were generally pleased with Wagner's comments. Brent Bailey, general counsel for Duke Energy, said that even if the formula Wagner recommends produces $1.5 billion in refunds, "that's a reasonable amount in the context of these settlement talks."

California accused the producers of manipulating supply to unfairly drive up prices. The producers have acknowledged that prices are high, but blame jumps in the price of natural gas, which fuels many power plants, and the workings of the free market

The bill for wholesale power in California soared to $27 billion last year from $7 billion the year before. Davis has estimated that the state could spend as much as $50 billion this year.

The producers reiterated Monday that California's numbers are grossly inflated. Attorneys for the five major generators -- Duke Energy, Dynegy, Mirant, Reliant Energy and the Williams Cos. -- said in a statement that they have made a "very substantial global settlement offer."

John H. Stout, a senior vice president for Reliant Energy, said his company would agree to no more than $50 million in refunds as part of an overall settlement that also would have to include protection from additional legal claims.

But Stout also said, "Reliant's fundamental position has been and remains that no refunds are justified."

FERC ordered the talks last month in an effort to resolve differences between producers and the state over the breakdown of California's deregulated electricity market.

-- pho (owennos@bigfoot.com), July 09, 2001

Answers

FERC will have to re-write the Law of Supply and Demand if they are going to get around this one. Should be interesting.

-- JackW (jpayne@webtv.net), July 10, 2001.