San Diego Union-Tribune

June 28, 2001

Judge in settlement talks says he isn't biased against amount
   He is on record as calling Davis' figure of $8.9 billion 'too much'

Copley News Service 

WASHINGTON -- The judge mediating settlement negotiations in
California's energy dispute said yesterday that he was not prejudging the case by contending Gov. Gray Davis' demand of $8.9 billion in refunds from power suppliers is too high.

"As I've said before, I think $9 billion is probably too much. Maybe it isn't," said Curtis Wagner Jr., the chief administrative law judge for the Federal Energy Regulatory Commission.

"I have not the least idea what the fair figure for refunds are . . . . I'm groping in the dark at this point," he told reporters before going into the third day of the closed-door discussions.

Wagner's comments about the potential size of the refunds from companies accused of overcharging, which he first made several days before the talks began here Monday, raised the eyebrows of some observers. One report quoted him as citing a figure of "two-and-a-half billion, maybe a little more."

Frank Wolak, a Stanford University economist who is affiliated with the agency that runs the state power grid, said he was "shocked" by the comments.

"You're supposed to be impartial and wait to see the analysis and the numbers before you make a judgment," said Wolak, who is a member of the Independent System Operator's market surveillance committee.

Others said the figures cited by Wagner were just one more set of numbers to add to an already bewildering mix.

"He was vague," said Michael Shames, executive director of the Utility
Consumer Action Network, a San Diego-based consumer group that believes the state is due more than $8.9 billion. "He's a very savvy, very experienced guy. He's not going to make a rookie mistake."

Davis spokesman Steve Maviglio said: "We're confident that once he sees all the evidence, he will be moved in an upward direction."

State officials began laying out their numbers at the talks yesterday, and participants debated the methodology, sources said.

Power suppliers, who deny the state's allegations of price gouging, say the refund demand is unrealistic. They also are seeking money they are still owed for wholesale power sold to California utilities and state entities.

Wagner is "spot on when he says $9 billion is too high," said Gary Ackerman, executive director of the Western Power Trading Forum, an industry group.

The suppliers are expected to start presenting their arguments today, sources said.

The state's refund demands are complicated by questions over the extent of FERC's jurisdiction. The agency has no authority over public power providers, such as municipal utilities. FERC also has said it cannot scrutinize power sales before October 2000, while the state is pressing for refunds for charges dating to May 2000.

A June 19 report by California's ISO said that $2.9 billion of the $8.9 billion in apparent overcharges were incurred before October 2000. The report also suggests power sales that may not have been under FERC's jurisdiction accounted for about $3.4 billion of the alleged overcharges.

But state officials say they will argue that FERC has the power to order refunds in all the cases of overcharging they will cite.

FERC ordered the negotiations last week, when it slapped around-the-clock price restraints on wholesale power sold in the West.

In other power developments:

The state Public Utilities Commission has put off consideration of rate hikes for customers of San Diego Gas & Electric until next month.

The Los Angeles Department of Water and Power has tentatively agreed to sell California its extra electricity at cost. The deal, reached after months of negotiations, would provide at least 500 megawatts a day -- enough power to light 500,000 homes -- between July and September.

This is one of several emerging deals the state has made for additional power this summer to try and avoid blackouts.