FERC judge presses generators, California to settle

By the OGJ Online Staff

HOUSTON, July 9 -- An administrative law judge late Monday continued to press power generators and California negotiators to settle on terms of refunds the state is demanding for alleged overcharges for electricity.

At the same time Judge Curtis Wagner also outlined what he will recommend to the Federal Energy Regulatory Commission, if the parties can't reach an agreement Monday. In public comments, Wagner said the refunds should be in the "hundreds of millions" to possibly $1 billion, but not the $9 billion California Gov. Gray Davis is demanding.

In an preliminary oral assessment, Wagner said methods used in FERC's June 19 order that instituted price controls in the western US should be applied retroactively to October 2000. Electric generators have contended refund claims can only be made for power bought after November 2000, reducing California's claim to about $6 billion.

Wagner also said he would consider recommending several changes to the commission's method of calculating electric prices in the June 19 order. He said the California gas market should be divided into north and south for pricing purposes rather than the single market used to calculate prices in the June 19 order. Prices in southern California have tended to be substantially higher than in northern California.

Wagner said the hourly heat rate used for calculating electricity prices should be the actual heat rate reported on marginal dispatch for the California Independent System Operator market, said FERC spokeswoman Tamara Young-Allen.

Wagner agreed with the June 19 order that electricity sold in California should include a 10% credit risk, she said, among other recommendations.

If no settlement is reached by Tuesday, Wagner said he would give the parties until Thursday to comment on his recommendations. It will then be up to the five-member commission to decide the amount of refunds and how they would be allocated among the companies. California and investor-owned utilities there also owe the generators billions of dollars in uncollected receivables so those would have to be taken into consideration.

The parties appeared to remain far apart earlier in the day. Some details of the talks held in secret for 2 weeks emerged during an open session Monday morning. Representatives of the generators, including Reliant Energy Inc., Houston; Williams, Tulsa, Okla.; Mirant Corp., Atlanta, Ga.; and Duke Energy Corp., Charlotte, NC, criticized California for being unbending.

Davis said Friday he would consider noncash compensation, including renegotiated contracts with the state for electricity, debt forgiveness, and below-market prices in future contracts.