FERC: Settlement Talks Focus on Both NW, CA Issues

Bowing to pressure from Capitol Hill, the Federal Energy Regulatory Commission ruled that the settlement conference currently in progress in Washington D.C. could address issues related to past power sales to consumers in the Pacific Northwest, as well as California.

The settlement parties "are not limited to settling only California-related matters, but may also focus on settling past accounts related to sales in the Pacific Northwest," the Commission order said [EL00-95-031]. FERC has left if up to Chief Administrative Law Judge Curtis L. Wagner to decide whether this should include refunds for the Pacific Northwest, a FERC staff source said.

FERC took this action after several Pacific Northwest lawmakers urged it to expand the scope of the settlement discussions. In a more specific request, Sen. Maria Cantwell (D-WA) asked Chairman Curt Hebert to "clarify" whether Pacific Northwest power customers, who she says have been charged "unjust and unreasonable" power prices, would be eligible for refunds as a result of the ongoing settlement discussions, "or whether separate settlement talks will be necessary."

Cantwell said clarification was warranted in light of apparently conflicting testimony that Hebert gave to two different Senate committees in mid-June. While Hebert told the Senate Energy and Natural Resources Committee that only California consumers would be considered for refunds, she noted he told the Governmental Affairs Committee that the settlement refund discussions would be open to all parties involved in the San Diego Gas & Electric Co.(SDG&E) complaint case, which includes both Pacific Northwest and California entities [EL00-95]. Some of the Pacific Northwest parties to the SDG&E case are: Puget Sound Energy, Seattle City Light, Bonneville Power Administration and the Washington Utilities and Transportation Commission.

The settlement talks got under way last Monday at the Commission's headquarters in Washington D.C., and are scheduled to continue until July 9. If the settlement parties --- including California representatives, public utility sellers and buyers in the Cal-ISO, a representative of Washington State, and Pacific Northwest utilities --- are unable to resolve the issues within the allotted timeframe, FERC has directed Wagner to issue an initial decision within seven days to the full Commission.

Wagner, who is mediating the settlement negotiations, gave the parties a pep talk at the start of the settlement negotiations last week. "I can tell you now that you are far better off to work out the refund issue in these settlement proceedings. The time to put California's past energy problems to rest and structure a new arrangement for California's energy future is now. We can do it if we try. I have the upmost faith in you."

He noted his job was to keep both sides talking to each other. "My role is not that of a judge. No robe, no gavel, and I'm not [sitting] on the bench. I'm just going to be a mediator/settlement judge and facilitate the discussion, keep you talking with each other. I will broker those things you want me to broker. You tell me something in confidence, it will be kept in confidence."

In a joint statement read to settlement participants, Commissioners Pat Wood III and Nora M. Brownell advised them to "focus on what they absolutely need, not [on] what they want." The settlement process "is not the place to debate the shopping list nor is it the place to assign blame," the two said. "Everyone must leave with something more than they came in with. This is not a winners/losers end game. Everyone must respect each other and the process."

The settlement talks have been "closed" to the public, but a few non-parties to the SDG&E complaint case are being allowed to attend as observers, including staff aides of Sen. Cantwell.

California Gov. Gray Davis claims the state's customers are owed refunds of as much as $9 billion on power sales from Texas-based power generators and marketers, such as Enron, Dynegy, Reliant, Williams and Duke Energy. All signs indicate that California will get only a fraction of this claimed refund amount --- about $2.5 billion. The potential refund amount for the Pacific Northwest seems more difficult to quantify. Some Capitol Hill aides estimate refunds could run into the hundreds of millions of dollars, while others concede "we're not sure."

At the end of the first day of settlement discussions, Michael Kahn, California's chief negotiator in the FERC talks, said that "everyone [was] interested in the support for the [refund] numbers that the governor and the Cal-ISO have been using." He noted "you can extrapolate from that that Judge Wagner may be interested in that, too."

In addition to refunds, Wagner noted that there were several other issues that had to be answered if a settlement was to be reached. Other issues on the table, he said, included the unpaid bills for power sold to California utilities by independent generators and marketers; the load that is to be moved from the spot market to longer-term contracts; creditworthy issues; the organizational and structural issues concerning the Cal-ISO and its board; the constraints posed by the imbalance of intrastate and interstate pipeline capacity in Southern California; whether the settlement should offer immunity from existing and future lawsuits and prosecutions against power generators; and the pending bankruptcy of Pacific Gas and Electric.

"These issues are not intended to be all inclusive in anyway. I put them on the table as essentially questions to be answered if settlement is to be achieved," Wagner said.

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