Southern California Edison made good on its threat to go tocourt if FERC failed to respond immediately to its request tore-impose price controls on bulk power sales in the in theout-of-control California market.

Edison, which is teetering on the brink of bankruptcy, asked theU.S. Court of Appeals for the District of Columbia CircuitWednesday to force FERC to re-establish cost-of-service regulationin the market in an attempt to tame skyrocketing wholesale prices.

The clerk of the D.C. appellate court has directed theCommission to reply to Edison’s lawsuit by Jan. 2, according toEdison. Pacific Gas and Electric (PG&E), which also is facingpossible bankruptcy, is said to be preparing a similar suit.

In separate emergency motions last week, both Edison andPG&E asked FERC to suspend market-based rate authority forsellers in the California electric market by Dec. 20 and Dec. 21respectively, or they would go to court. The Commission respondedto the urgent motions with a customary tolling order, whichessentially allotted it 30 days to consider the utilities’requests.

California Gov. Gray Davis returned Thursday from his two-dayswing through Washington, D.C., and immediately tried to reach outto the state’s major utility consumer activist group by holding a90-minute telephone conference call with some of their leaders. Itwas basically a listening session for the governor, and nothing waschanged as a result of the session, according to the governor’spress office in Sacramento.

“It was just another dialogue and everyone agreed that FERC isthe Evil Empire,” said the governor’s energy spokesperson, SteveMaviglio, noting that some of the consumer representatives were”more reasonable than others,” but all of them maintained strongopposition to granting any retail rate relief to the state’s twomajor investor-owned utilities.

The consumer leaders want to see the results of the whirlwindutility audit by two outside firms, and they continue to “not givea lot of credence to the claims by the utilities,” Maviglio said.

The San Francisco-based utility watchdog group, TURN, complainedthat regulators and the governor have pre-determined already thatretail rate increases will be granted.

“TURN is very concerned the decision has already been made sincethe CPUC before hearing any evidence in the case seems to bepredisposed to raising rates,” said a TURN spokesperson. “We arehappy to discuss our proposals with the governor or anyone else,but we want to be clear that because we participated in a telephoneconference call does not mean we support the decision-makingprocess in this case. Our concern is that a decision has alreadybeen made.”

Regulatory hearings in San Francisco on Thursday were extendedthrough today as various stakeholders packed sessions before twoadministrative law judges and several of the CPUC commissioners.

PG&E and Edison representatives at the second day ofhearings before the California Public Utilities Commission werepressed by CPUC staff to defend their requests for 30% rateincreases, which would allow them to begin collecting what theutilities estimate will be more than $11 billion in uncollectedwholesale power costs. An Edison representative Wednesday indicatedif the utility were to recover all of its power supply costs notnow covered in retail rates, the total increase needed would beabout 82% over current rates that have been frozen at mid-1996levels since California began its electric industry restructuringprogram.

Gov. Davis is refusing to get pinned down on what he thinks is areasonable rate increase for the utilities, preferring to punt tothe CPUC, which he underscores is “the legal body that will makethe determination” about what is appropriate. When asked directly,he has denied that he wants to re-regulate energy, noting thateventually the state can make deregulation work….

“If deregulation fails in California, deregulation is over inAmerica,” Gov. Davis told a national television audience Tuesdaywhen he appeared on a cable-TV network business program. He notedthat the merchant generators, who he regularly scolds for theirgreed and alleged “market gaming,” should act in their own vestedinterest, helping to make sure that deregulation does not fail.

Another issue being looked at by the CPUC as part of the raterequest concerns the sale of remaining utility generation assets,including major hydro-electric and nuclear plants. PG&E’sutility has now agreed that its extensive, multi-billion-dollarhydro-electric system that it has been pushing to move to anonutility affiliate should remain in the utility until “such timeas the wholesale energy markets are functioning appropriately andcompetitively.” It estimates that time is another two years.

PG&E noted that delaying the divestiture of these othergeneration assets is “not consistent” with the state’s 1996electricity law, so it is one of the issues the state legislaturewill have to remedy when it starts a special session next month.

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