CA Officials Not Expecting Favorable FERC Decision; Eye Courts for Relief

California state leaders are "not overly optimistic" they will get the $9 billion in refunds on high-priced power they claim Californians are owed when the Federal Energy Regulatory Commission rules Wednesday, so they're prepared to carry the fight to the 9th Circuit Court of Appeal.

"I'm hopeful, but not overly optimistic," said Richard Katz, the governor's energy adviser said in a Tuesday media briefing. Katz said that he was cynical that FERC in less than a month could have absorbed the state's 4,000-page "mountain of evidence," or the more recent comments filed last Thursday in order to acknowledge the "depth and breadth of the ripping off" that took place in 2000-2001 in the wholesale energy markets in California and throughout the western states.

"Tomorrow's the day we'll find out if there really is a 'new' FERC that (Chairman) Pat Wood has been talking about," he said. "The governor has made it clear that there is overwhelming evidence that we supplied to FERC in the 100-day (discovery period) documents that there was widespread market manipulation, gaming of the market and lack of enforcement of the rules by FERC. So, we believe ratepayers are owed $9 billion, and the governor is committed to getting $9 billion back for them, if we could."

(Ironically, in response to a specific news reporter's question later in the briefing, another administration official, Erik Saltmarsh, the chief counsel with the state Electricity Oversight Board, said most of the money owed to suppliers or potentially paid by them in refunds will go to load-serving entities, such as the private-sector utilities to balance their books. How much and how soon any monies are given back to utility consumers has not even been figured out yet., according to Saltmarsh.)

While concentrating on the refunds and attempting to put more media attention on the state's desire to get FERC to grant its full request, officials also said they learned that the state power contract issue would also be on FERC's agenda. They noted that excluded from that issue are some $23 billion of contracts that already have been reworked at what the state claims in a $5.2 billion reduction from their terms entered into in 2001.

The state officials also repeated their hope that FERC will soon make public the evidence it presented March 3 to the federal regulators. State regulatory commission member Geoffrey Brown called the evidence "shocking -- direct evidence of the gaming of the market, gaming that brought on a $44 billion cost to consumers of California. That cannot be ignored, and FERC must do its duty."

"The issues are teed up," said Mike Florio, the lead attorney for the consumer watchdog group, TURN (The Utility Reform Network) and a board member at the state power grid operator, CAISO. Florio noted that a "number of natural gas issues well beyond the El Paso case" are also on the table.

He and other state officials are hopeful that their understanding that FERC will adjust the gas formula used in the refund case should increase the amounts federal regulators will okay for restitution. "How can they (FERC) find that the short-term market was unjust and unreasonable and requires refunds, but that the (long-term) contracts the state was forced to sign to escape that manipulated spot market are somehow okay?" Florio asked rhetorically."Logically it just doesn't fit.

"The long-term contracts, the natural gas prices and the electricity refunds are all teed up, and its time for California ratepayers to get their due."

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