Threatening takeover of the state’s electric infrastructure,California officials Tuesday continued their unwavering call forthe Federal Energy Regulatory Commission to provide consumerrefunds and cost-based rates to stabilize wholesale markets in thestate and throughout the western U.S.

If these actions aren’t taken, California will be forced to goto court and eventually create its own public power agency toprovide generation at “justifiable prices,” the state officialstold FERC Chairman James Hoecker and Commissioner William Massey.The two presided at a FERC public conference in San Diego, thesecond held by the Commission to hear comments on the Commission’sproposal to overhaul the “seriously flawed” rules and structure ofthe California bulk power market. FERC proposed a “soft” $150/MWhcap on power sales into the Cal-ISO and Cal-PX over the next twoyears, and rules changes for those agencies, but said it would notgrant consumer refunds.

“We will resort to any remedy available to us,” Gov. Gray Davissaid. “We won’t stand by idly and let these higher rates happenagain.” Accusing FERC of being too focused on generators andutilities, Davis reiterated his call for the federal refunds toconsumers “who continue to be gouged by generators and marketers.”He also said the Commission should impose “hard price and bid caps”until competitive markets are a reality. It is “incomprehensible”that FERC hasn’t already ordered the refunds based on its ownconclusion that wholesale prices are unjust and unreasonable.

Davis said FERC’s proposed soft caps and other measures wouldmaket the situation “worse” next summer. The deregulationexperiment will end and consumers will resort to the ballot box ifFERC doesn’t act, he continued, referring to the state’s referendumprocess. State Sen. Steve Peace, a prime architect of the 1996state electric restructuring law, challenged FERC to “interpret itspower broadly” as he said the federal regulators did when theyoriginally opened up the wholesale power market eight years agowithout congressional authority to do so. Citing an old FederalRegister report, Peace said FERC originally projected wholesalederegulation could create savings of $3.8 to $5.4 billion annuallyand result in power generation prices in the 3.5 cents per kWhrange. Instead, Peace said, prices Monday in the day aheadCalifornia market were 18 cents per kWh.

Peace said FERC “will never reach the goal of competitivemarkets unless it uses cost-based rates to create a stable platformfrom which to work.”

Local officials and consumer representatives indicated thatwithout re-regulation by FERC, the state and local jurisdictionswill look to creating government-run power organizations. Thechairwoman of the San Diego County Board of Supervisors said she issure the state will move to create a public power agency if FERCdoes not fix the problem. FERC has a “legal, moral and ethicalobligation:” to investigate the merchant generators.

At a press conference following his appearance before thecommissioners, Davis, however, indicated he did not think thegenerators necessarily had done anything illegal, but indicated thestate attorney general is still looking at that question.

At Hoecker’s urging the governor said the state would submit itsown proposals to FERC by Dec. 1, so they can be considered when thefederal regulators make a final decision Dec. 13.

Richard Nemec, Los Angeles

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