As FERC Refund Talks End, Davis Says $8.9B is Non-Negotiable

California Gov. Gray Davis said Friday the the state's $8.9 billion estimate for refunds owed to its electric customers isn't negotiable, but he will to consider alternative forms of payment other than straight cash refunds, such as the re-negotiation of long-term power contracts.

Davis said he was "optimistic" about the outcome of the settlement talks at Federal Energy Regulatory Commission with respect to refunds for California customers. "If we can settle this matter to the satisfaction of the administrative law judge and all parties, that would be terrific," he noted. "If we can't, FERC still has the full burden to enforce the law and ensure that we get the full rebates we are entitled to."

The governor said he would accept nothing less than the estimated $8.9 billion that the state transmission grid operator, Cal-ISO, has calculated as potential overcharges from power suppliers, including a number of large government-run operations, such as BC Hydro and the City of Los Angeles Department of Water and Power, which FERC doesn't regulate. Moreover, he noted he was unwilling to drop any ongoing investigations against generator/suppliers.

"The ball is in FERC's court to get us back $8.9 billion," Davis said. "Will I take less than that? No. I have instructed my negotiators to make clear to the judge that we are open to other forms of repayment, including renegotiating some existing contracts...or contracting for additional power at below-market rates. That isn't a proposal we are making; we simply suggested to the (FERC administrative law) judge we were open to that.

"That is the money Californians are owed. My job is to fight for every penny of that.

"I don't think too many people three months ago felt we would get prospective price relief out of the FERC, but I kept the pressure on the Bush administration and the FERC. Believe me, we would not be having this discussion if it were not for a full-court-press by state and federal officials on the Bush administration and the FERC in particular."

A decision by FERC Chief Administrative Law Judge Curtis L. Wagner Jr. to continue negotiations over the weekend into refunds and other financial issues related to the California energy crisis was taken by some as an optimistic sign that the parties may be nearing a settlement.

"The talks must be moving along," said a Commission spokeswoman Friday, upon reporting that the "closed" settlement talks would continue on Saturday and possibly Sunday. Last week, Wagner had said he would give a "preliminary assessment of the refunds owed" on Friday unless headway was being made by California and the out-of-state power suppliers on this issue. But Friday he deferred making an assessment until either today (July 9) or later, and indicated he would give the settlement parties an opportunity to comment before he made a final report to FERC.

In related developments, Davis reported the state's overall power costs in June were about $1 billion, the "lowest by far" of any month since the state began purchasing bulk electricity in January. He attributed the turnaround to long-term supply contracts, new power plants coming on line and the return to service of small qualifying facility (QF) generators who account for 30% of the state's power supplies.

The average cost of power in the state was $167/MWh in June, about half of January's average cost ($332) and about 30% of May's average cost ($243), including all spot supplies, short-term purchases and long-term contracts. Average day-ahead spot prices were down to $99/MWh in June, compared to $243/MW in May, state officials said.

In May, roughly 4 million MWh were purchased, and in June that total dropped to less than 2 million MWh (1.98 million MWh).

Regarding a state Superior Court judge's expected order July 16 forcing the state to make public all of its electricity transactions, Davis and "we feel we will forfeit much of the progress we have made in spot purchases if every transaction has to be revealed as it is consummated."

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