Sounding more embittered and hair-trigger-happy with each passing press conference, California’s governor Tuesday continued to draw a line in the sand at $8.9 billion for power supplier refunds at the same time standing ready to negotiate with individual suppliers or small groups for portions of that amount in cash or future price discounts or power contract renegotiations.

Calpine Corp. and “others” have indicated to state officials that they want to negotiate individual settlements, according to California negotiators.

Regardless of what happens at FERC, other settlement talks must proceed independently among state lawmakers, regulators and generators in California, said Gov. Gray Davis, noting he may order the state legislature to delay its scheduled summer recess July 20 if there is no progress by that time on the long-delayed deal with Southern California Edison to help restore its financial viability.

The deal with Edison includes an Aug. 15 deadline for legislative action on the so-called “memorandum of understanding” (MOU), and Davis said the utility’s creditors are watching that date closely, so he thinks it is imperative that the legislature “acts responsibly before that deadline.” The governor was asked but wouldn’t speculate on whether Edison would be forced into bankruptcy if no action is taken by Aug. 15.

Davis’ own chief negotiator in the just-concluded 15-day federal settlement talks, Cal-ISO Chairman Michael Kahn, made clear that at least $3 billion of the state’s claim was not even considered by the mediator in the talks because he refused to go back before October, the time at which suppliers were put on notice that their charges would be subject to possible refunds.

“The Federal Energy Regulatory Commission said in its order that for the purpose of the refund proceedings, it would not consider the $3 billion [California claims it was overcharged from May through September last year],” Kahn said. “In addition, the judge indicated he was going to exclude the charges by municipals [government-run suppliers]. That included about $600 million, so right off the top, he was only dealing with $5.4 billion.”

FERC Administrative Law Judge Curtis Wagner indicated he didn’t know how much of the lower amount should be refunded, Kahn said, but he did accept a formula that was very similar to one California used. “And it should be pointed out that no one else among the parties suggested a formula. We are the only ones who came with a methodology, and the judge accepted our methodology.”

Kahn said the judge “fully understood” that California expects to seek further redress in the courts. And a representative from the state attorney general’s office indicated that the ongoing investigations of generators/suppliers would continue unaffected by the outcome of the FERC proceedings.

“We’ll see you in court,” Davis warned federal regulators Tuesday if they don’t provide the full $8.9 billion in refunds for alleged overcharges by wholesale power suppliers who did business with the state from May of last year through May of this year. He challenged the FERC commissioners to show they are “on the side of the consumers” and not just “doing the bidding of the industry as they so often have in the past.” Davis continued to chastise the suppliers for not offering “one penny” of refunds, but only offering to lower the amounts of unpaid power bills.

“Our entire delegation made a forceful, compelling case,” Davis said. “[Kahn] believes that the number that the judge recommends for refunds will be considerably north of [higher than] one billion dollars.

“And I want to emphasize that the generators strongly opposed the notion that any refunds were owed. Their best offer was that we owe them money. I don’t consider that negotiations. My intent is to let them [FERC and the generators] know that California is not going to go away.”

Davis at one point admitted that if he were a CEO of one of the generators, he would “be arguing for no refunds, too. I don’t blame them for vigorously contesting our case, but now the judge and the five commissioners have to do the right thing.”

In response to the FERC judge’s expected proposal for 60 days of evidentiary hearings, Davis said the regulators have an “ample record” before them and should be able to make a decision next week. He said he hoped they would not allow the generators to stall by embarking on some “fishing expedition.”

“Our position is clear: we want FERC to order what it thinks is fair, and then, we’ll take what it orders and then see them in court.

“They have to make a fundamental decision,” he told a Sacramento news conference. “Are they on the side of the consumers as the Federal Power Act says they should be? Or are they just going to do the industry’s bidding as they have so often in the past? I continue to believe that with the two new commissioners, FERC is on a new path.

“My message is very clear. If you think California is going to settle for one billion dollars in refunds, we’ll see you in court.”

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