San Diego Union-Tribune

May-21-01

Governor adamant on refund at hearing
   Davis, on Capitol Hill visit, deflects blame for shortages

FINLAY LEWIS and JOE CANTLUPE 
COPLEY NEWS SERVICE 

WASHINGTON -- Gov. Gray Davis sparred with Senate Republicans yesterday as he blamed federal regulators for ignoring what he said was a $9 billion scheme by power companies to bilk Californians.

Testifying before the Senate's Government Affairs Committee, Davis demanded that the Federal Energy Regulatory Commission order power companies to refund the overcharges.

But the governor was forced to respond to Republican claims that his policies turned a solveable problem into a full-blown energy crisis.

The partisan give-and-take reflected the mounting political stakes involved in California's plight. The subtext of Davis' testimony involved a recognition that the state's energy problems could affect the outcome of several California
House races next year, as well as the governor's own re-election.

"How did you let things get so totally out of hand?" Sen. Fred Thompson of Tennessee, the committee's ranking Republican, asked Davis.

Thompson's question could have been lifted from the script of a $1.5 million GOP advertising campaign launched earlier this week in California that attempts to put the governor on the spot for the energy crisis. The campaign follows weeks of criticism by Davis of federal regulators and of President
Bush for failing to address the energy problem.

Davis' rebuttal involved a long recitation of his moves to bring more power on line in the state and to encourage greater conservation.

"We've been working on this for a very long time, and to suggest otherwise would be inaccurate," he told Thompson.

The Democratic governor said he is determined to hold "FERC's feet to the fire" on the refund issue.

"It is unconscionable that the commission looked the other way while energy companies bilked our state for up to $9 billion," he said.

Davis' grievances received more attention here than they might have just weeks ago, before Democrats took control of the Senate and its committees after Sen. Jim Jeffords of Vermont bolted the Republican Party to become an independent. A sympathetic committee chairman, Democratic Sen. Joe
Lieberman of Connecticut, made Davis the star witness of yesterday's hearing.

Recent public opinion polls show that Davis has lost substantial ground with California voters since the electricity crisis hit, but Republicans have acknowledged that Davis and Democrats in recent weeks have gained the upper hand over the Bush administration in the energy debate.

Despite some GOP criticism yesterday, Davis was clearly on the offensive.

"Obviously, this is the equivalent of a political nuclear weapon for him," observed Norm Ornstein, a congressional affairs expert at the American Enterprise Institute.

Several hours after Davis completed his testimony, the five FERC commissioners appeared before the committee, but they largely ignored the governor's accusations.

On Monday, FERC issued an order to control energy prices in California and much of the West for the next 15 months and to set up a procedure for reviewing refund claims.

"The commission is not ducking these issues," said FERC Chairman Curtis Hebert.

However, there remains a substantial gap between Davis' calculation of electricity overcharges in California and the $124.5 million in refunds assessed so far by FERC, which have been contested by power generators.

The struggle over refunds enters a new phase Monday when the review procedure outlined by FERC will begin before the commission's chief administrative law judge, Curtis Wagner Jr. Facing off against the power companies will be senior officials of the Independent System Operator, which runs the California power grid.

Davis told reporters that it was the ISO that produced the $9 billion estimate of California's electricity overcharge.

"To date, not a single penny has been returned to Californians," Davis told the committee. "It is unconscionable that the generators be allowed to keep these egregious overcharges."

Sen. Barbara Boxer, D-Calif., yesterday introduced legislation to provide for refunds.

The power companies, although acknowledging huge profits, have denied allegations of price gouging or market manipulation.

"There has been no evidence to suggest that suppliers bilked anyone," Mark Stultz, a vice president of the Electric Power Supply Association, told the Associated Press.

California Attorney General Bill Lockyer is reviewing possible price gouging, and Davis said after the hearing he anticipated "some strong action" from Lockyer in the next few months.

Davis said he plans to meet on Monday in Sacramento with Bush's two new FERC appointees, Pat Wood III and Nora Brownell, about "natural gas discrepancies" in California. Davis said California has been paying up to three times more for natural gas than elsewhere in the country.

"The president agreed with me this is something that could be fixed," Davis told a reporters after meeting with the California congressional delegation.

Reps. Duncan Hunter of El Cajon and Darrell Issa of Vista were among the Republicans who met with Davis.

"It was a good meeting with the governor," Hunter said, adding that FERC "has taken steps to lock down prices, and the results speak for themselves. I think we are all working together, and it's a good sense of common ground."

That was not the mood in the committee hearing, however.

Sparring with Davis, Thompson argued that there had been ample advance warnings of the crisis. He noted a 1998 report forecasting an imminent energy shortage and the fact that the state was undergoing a rapid period of economic growth spurred by the energy-intensive high-tech industry.

"Did you see those developments?" Thompson asked. "Did they cause you concern?"

Davis sought to shift the focus back to his predecessor, Republican Gov. Pete Wilson, and the state Legislature, which approved an energy deregulation plan now widely recognized as seriously flawed.

However, he said those problems did not become apparent until last year.

Thompson also criticized Davis' recent rhetoric castigating the power companies for price-gouging and suggested that the tactic could backfire by dissuading the energy sector from making needed investments in the state's power infrastructure.

"The people I represent are mad," replied Davis. "They want us to fight back and that's what I'm doing."

He said he is determined that the state cease serving as "a cash cow to a lot of energy companies."