FERC Chief Administrative Law Judge Curtis L. Wagner, citing progress toward settling at least 80% of an estimated 24 long-term contracts in dispute between power suppliers and California’s Department of Water Resources (DWR), said late last Tuesday he was scheduling additional settlement meetings for Aug. 28-30.

“We have made so much progress today that I’m setting a further settlement conference.” In the meantime, Wagner said he would hold off scheduling hearings while the talks continued. He pointed out that for contracts that weren’t settled, the hearing “would be very difficult and complex,” centering on deciding whether the California energy market was so dysfunctional that it could render long-term contracts null and void; and subject to cancellation as a result.

The judge was hopeful they wouldn’t have to go there. “Hopefully, we can settle it all and everyone goes home and lives happily ever after,” Wagner told reporters at the end of day-long negotiations. In the latest briefing he declined to say how many companies were close to settling or any of the details or terms of the agreements.

Earlier Tuesday, Wagner said he had hoped to be announcing later on which parties had reached settlements with California on renegotiating billions of dollars worth of high-priced power contracts that were signed during the 2000-2001 energy crisis in the state.

Talking to reporters early Tuesday afternoon,Wagner seemed optimistic there would be some settlements among the nine parties that met in breakout sessions in different rooms at the Commission’s headquarters all day long. “We’re getting close on some additional settlements, but some will have to go to hearing,” Wagner said.

Parties involved in last week’s negotiations included Mirant, Dynegy, Sempra Energy, Coral Energy, Allegheny Energy, El Paso Merchant Energy, Alliance-Colton, and Morgan Stanley Capital, the judge said. Williams has already revealed that it has agreed with California negotiators and submitted an agreement in principle to the settlement judge.

“Significant offers and counteroffers were exchanged between the state and eight individual sellers” on Tuesday, Wagner said a a report to the full Commission the following day. “Several of these offers are global in nature and would resolve all pending claims, including those in the refund case [at FERC] and those in the California state courts.”

Five settlements in principle had already been reached last month, and “are currently being reduced to writing,” he told FERC. Wagner said he was optimistic that others among the 14 sellers whose contracts had been challenged would follow. “Most, if not all, of the involved disputes” are likely to be disposed of through negotiated settlements, he noted.

Previously, Wagner had indicated that two parties had no offers on the table and would likely have to go to hearing.

California wants to renegotiate about three-quarters of its $43 billion worth of long-term contracts, signed last year at the height of the state’s electricity crisis with over 20 energy firms to obtain needed supplies. In a February filing with the Commission, the state alleged that energy firms overcharged it up to $21 billion.

Earlier in the year, the California DWR, the buyer for financially strapped utilities, and four other suppliers renegotiated about $11 billion of the contracts, the bulk of which were with San Jose, CA-based Calpine Corp.

Chairman Pat Wood, also wandering FERC’s halls Tuesday, said he wanted the hearings or settlements regarding California contracts completed by the end of the year.

Regarding his recent trip with Commissioner Nora Brownell to Wall Street, to set the financial world straight on what’s going on in the energy industry, Wood said “they were very surprised to see FERC on the offense.” Prior to the trip on Aug. 2, Wood had said that at least part of their mission would be an attempt to clear up misperceptions that have led to what he characterized as overreactions on the part of financial professionals.

“The bottom line, they need to know what the long-term agenda is and why certain things that they’re overreacting to are not such big deals; and maybe things they aren’t reacting to should be big deals.” The FERC chairman also believes that there is “a good story to be told” about what energy traders do. “How on Earth does all this work get done if you don’t have somebody in there kind of connecting the seller and the buyer and managing all that risk?” he said. “Perhaps there is a legitimate response to understanding now what the traders are. It’s been a lot of upside and not much downside. People tend to forget that this was a swinging pendulum in that industry, but I think we’ve got to make sure that that risk — once it’s understood — gets properly put in place and then people move forward.”

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