FERC orders hearings in California refund case

By the OGJ Online Staff

HOUSTON, July 25 -- The Federal Energy Regulatory Commission Wednesday ordered an evidentiary hearing to determine how much California generators owe the state for so-called "overpriced" power.

The commission also ordered a separate hearing to determine if refunds from generators are due parties in the Pacific Northwest.

FERC accepted the recommendation of an administrative law judge to establish more facts in the case before setting an actual dollar figure for the refunds. Administrative Law Judge Judge Curtis Wagner tried in July to mediate a settlement between the parties but was unable to do so.

Wagner said the differences between the parties over how much is owed involved factual disputes that could not be resolved during 15 days of settlement negotiations. He was also unable to come up with a refund figure because the California Independent System Operator didn't turn over necessary data to support its case.

The case was brought before FERC late last spring by the California ISO, which claimed generators should refund as much as $8.9 billion. Throughout the negotiations, California stuck to its demand the state was owed $8.9 billion, while the generators offered $703.6 million in refunds.

The hearing is to be completed 45 days from the date the ISO submits the requested data. The ISO has 15 days from the date of the final order to submit the required information.

Refunds will be calculated from Oct. 2, 2000 through June 20, 2001, not back to May 2000, which the ISO requested during the mediation hearings. Refunds will be calculated based on the spot market prices of gas not actual gas costs for each generator.

"I remain concerned about the commission decision to calculate the amount of refunds owed to California using the spot price of gas instead of actual fuel costs. The spot market prices the commission proposes to use are the very same prices under investigation by the same commission," said Michael Kahn, CEO of the ISO in a statement.

Both investor-owned utilities and public utilities are subject to the refund calculations, after the facts are established in the hearing. FERC Chairman Curt Hebert said there is a potential for oral arguments before commissioners, if the commission still has questions after receiving the final report from the judge assigned to the case.

Hebert also said the commission placed a "lot of weight" on the recommendations and conclusions of Judge Wagner. Wagner said refunds owed to purchasers of electricity in California "amount to hundreds of millions of dollars," probably more than a billion dollars, but not the $8.9 billion claimed by the state.

While "vast sums" in refunds are due, "there are even larger amounts owed to energy sellers by the CAISO [California Independent System Operator], the investor-owned utilities, and the state of California," he said.

California's Kahn said any portion of the $8.9 billion not covered by FERC refunds will be "litigated vigorously."