Union Tribune

November 21, 2002 

State can bolster its case for refunds
FERC complies with court ruling


WASHINGTON California officials were given authority
yesterday to seek and introduce more evidence of alleged price
manipulation by power sellers as federal regulators weigh
possible refunds for the state.

It is uncertain what effect the order by the Federal Energy
Regulatory Commission might have on the state's quest to
recover billions of dollars in power costs, or on FERC's separate
investigation of the 2000-2001 power crisis. 

But state officials hope to introduce evidence by Feb. 28 that will
bolster their case for refunds, including evidence uncovered by
FERC itself that is not part of the formal refund proceeding.

"It is my strong intuition that there is relevant information out
there that is not generally public," said Erik Saltmarsh, chief
counsel and acting director of the California Electricity
Oversight Board.

"We think we know the questions we want to ask. We think we can
proceed with that discovery quickly."

FERC's order, which complies with a federal court ruling, allows
fact-finding back to Jan. 1, 2000. That's nine months longer than
the period FERC has been examining for refunds, and it covers a
crucial period when rates began to skyrocket in San Diego.

But FERC Chairman Pat Wood said, "If a tariff or a rule or
regulation was violated at any time, we have the right to seek
disgorgement of profits from that specific transaction."

State officials now have "a significant right to seek information"
from power sellers and submit it to the commission by Feb. 28
as it considers its decision on the refunds, a FERC staff member

Said Wood, "This is their opportunity to formally put it before
the commission and have us look at it as we really try to close
out these dockets in the first part of 2003." 

He vowed that the new round of evidence-gathering would not
delay rulings that are expected between now and February or
March in the refund case and the broader investigation of West
Coast power market manipulation.

The refund case has dragged on since June 2001, when FERC
initially opened hearings on California's demand for $8.9 billion
in givebacks from power sellers who allegedly inflated wholesale

"We've got to wrap these up," Wood said. "February is really kind
of the closure month here. . . . It will have been three years after
the prices started to run up out there and it's getting a little old.
And we need for the customers that are waiting on potential
refunds, the suppliers that are very uncertain about their own
balance sheets to provide some certainty."

A FERC administrative law judge who has been hearing
testimony in the refund case is expected to make a
recommendation to the commission in the next few weeks.

In a statement, Gov. Gray Davis said: "It's too bad we have to go
to court to get FERC to do the right thing. At least the 9th Circuit
(court) understands what FERC still doesn't seem to: The
electricity market was manipulated and California is still owed
billions. The question remains: Why is FERC protecting the
energy companies and not California ratepayers?"

Power sellers, who resisted the move, pointed out that the FERC
order also gives them an opportunity to seek more evidence to
bolster their case that only minimal or no refunds are due.

"For instance, we could go back and look at what the IOUs
(investor-owned utilities) did," said Richard Wheatley, a
spokesman for Reliant Energy, one of the companies from which
the state is seeking refunds.

FERC was abiding by a little-noticed federal court decision
issued in August.

The 9th U.S. Circuit Court of Appeals granted a request by the
Electricity Oversight Board, the California Public Utilities
Commission and others to cite "additional evidence of market
manipulation by various sellers before FERC."

The FERC order allows the parties to seek information going
back to Jan. 1, 2000, and up to June 20, 2001, when the
commission imposed price caps that helped tame the power

Because of regulatory case rules, FERC has only considered
refunds going back to October 2000, which the state argues
could deprive California of billions of dollars. 

Power prices started rising dramatically in May 2000,
ultimately leading to shortages and rolling blackouts and forcing
the state to buy power on behalf of financially strapped utilities.

FERC's order allows the parties to conduct "depositions, data
requests and any other appropriate form of discovery," but
warns them not to "duplicate the discovery conducted in other
commission proceedings."

A judge will be appointed to resolve any disputes.