San Diego Union-Tribune

May 31, 2001

FERC boss unfazed by Davis' lawsuit threat
  Court has dismissed similar action already

By TOBY ECKERT
COPLEY NEWS SERVICE 

WASHINGTON -- The head of the Federal Energy Regulatory Commission said yesterday he is confident the agency would prevail in a legal battle with California Gov. Gray Davis over electricity price controls.

"I feel good about our chances," said FERC Chairman Curtis Hebert, citing a federal court's decision Tuesday to dismiss a similar lawsuit filed by California legislative leaders.

Davis has threatened to sue the FERC for allegedly failing to meet its legal obligation to ensure that wholesale power costs are "just and reasonable." Such a move would be the latest escalation in Davis' running battle with the agency over its response to California's power crisis.

"I think the 9th Circuit (federal appeals court) made very clear that the commission is doing its job appropriately," Hebert told reporters.

A three-judge panel of the San Francisco-based court rejected a suit by California Senate President Pro Tempore John Burton and Assembly Speaker Robert Hertzberg that sought to force the FERC to impose wholesale price controls. The court said the lawmakers "have not demonstrated that this case warrants the intervention of this court."

Davis says his administration has laid a firmer legal foundation for a lawsuit by first pursuing administrative remedies at the FERC. Several state agencies made a flurry of filings with the commission last week, asking it to crack down on wholesale prices that have increased tenfold over the past year.

"The (legislative leaders') lawsuit was thrown out . . . because there wasn't a preliminary filing with FERC asking for the relief that the plaintiffs went into court to seek," Davis said Tuesday. "We have made such filings as recently as Friday. . . . So we have to give them some time to review that information."

But legal experts said the state may have a tough time building a successful case against the FERC.

Federal statutes generally "give a great deal of discretion to agencies in
carrying out their duties," said Peter Shuck, an expert in regulatory policy at Yale Law School. "So it would be very hard for the state to prevail."

Hebert and fellow Commissioner Linda Breathitt have rejected the firm price controls sought by Davis, overruling Commissioner William Massey, who favors them.

Hebert says the commission has taken steps to lower wholesale power prices in California and punish price gouging. He cites $125 million in refunds recently ordered by the agency and a "price mitigation" plan that went into effect Tuesday.

The plan will use a complicated formula to set a price ceiling for power sales during severe shortage periods. Generators breaching the limit will have to justify their prices to the FERC or pay refunds.

Davis and other critics say the plan is riddled with loopholes and will bring little relief to the state. They also say the refunds ordered by the FERC to date fall far short of the billions of dollars in overcharges the state has endured.

Meanwhile, a spokesman for the California Independent System Operator, which controls most of California's power grid, said the agency intends to meet a Friday deadline for filing comments with the FERC on joining a regional grid management organization. The FERC has threatened to revoke the limited price curbs if the ISO fails to present a plan for joining the organization.