California's Davis claims flexibility in refund negotiations

California Gov. Gray Davis Friday said he is open to 'other forms' of payment besides cash from generators for alleged overcharges for electricity but insisted he won't accept less than the $9 billion he claims is owed the state.


By the OGJ Online Staff

HOUSTON, June 7 -- California Gov. Gray Davis Friday said he is open to "other forms" of payment besides cash from generators for alleged overcharges for electricity but insisted he won't accept less than the $9 billion he claims is owed the state.

Generators who sold electricity into California and representatives from the California Independent System Operator are in settlement talks to determine how much the generators are willing to forego in receivables owed them by California utilities and the state.

The talks are scheduled to continue through the weekend in anticipation of a Monday deadline set by the Federal Energy Regulatory Commission. If the parties can't agree, Administrative Law Judge Curtis Wagner will give recommendations to the commission which can then write its own plan.

Davis said during a press conference he would be willing to consider renegotiating at more favorable rates existing electric power contracts with generators or new contracts for more power at below market rates. "We would be open to that," Davis said, but the state is "not necessarily" promoting such a solution. The California Department of Water Resources is presently buying power on behalf on Pacific Gas & Electric Co., San Francisco, and Southern California Edison Co., Rosemead.

Davis repeated his belief the federal government is obligated by law to refund excess charges to Californians once FERC has declared the market not workably competitive. Noting FERC has made such a finding three times, Davis said "there is no wiggle room for FERC. But how they do it is up to them."

Up until he and California lawmakers began to pressure the Bush administration and FERC, the agency "acted like a wholly owned subsidiary of the generators," Davis said. Without that pressure, he added, FERC would not have imposed prospective price controls, which it did June 19.

Davis noted average electric power prices, including spot and contract sales, tumbled to $167/Mw-hr in June, down from $332/Mw-hr in January, and that June's total costs were $100 million less than forecast by the DWR earlier in the year. Average spot market prices were down to $99/Mw-hr in June, compared to $243/Mw-hr in May, he said.

The state purchased 1.98 million Mw-hr on the spot market in June, down from 4 million Mw-hr in May, he said, the result of long-term contracts kicking in. Davis said 5,000 Mw of power from small generators known as qualifying facilities are back on line, and financial incentives from the state helped induce owners to complete two large plants ahead of schedule.

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