Governor ‘outraged’ at stance FERC took

The San Diego Union-Tribune

SACRAMENTO — Gov. Gray Davis angrily denounced federal energy regulators yesterday, saying they “rigged the rules” and led a judge to conclude that California owes generators money — not the other way around.

“Every time the Federal Energy Regulatory Commission has had to choose between energy generators and California consumers, they have sided with generators,” Davis said.

“I am outraged over the action the FERC has taken in rigging the rules so the administrative law judge had no choice but to give us a pittance under the rules,” he said, referring to limits set by the commission on what the judge could take into account in determining refunds. “We want at least $9 billion back.”

A federal regulatory judge ruled yesterday that power companies overcharged California about $1.8 billion during the energy crisis, but said the state had an unpaid balance of $3 billion, and thus actually owed $1.2 billion to the suppliers.

At a news conference yesterday, Davis displayed a chart showing how Californians spent $7.4 billion on power in 1999, $27 billion in 2000, $26.7 billion in 2001 and $12 billion this year.

“To anyone who has any eyesight whatsoever it’s very clear we got stuck with $30 (billion) or $40 billion worth of payments we shouldn’t have to make,” he said.

Davis said California has previously obtained a federal court decision allowing the use of evidence of market manipulation that had been blocked by the FERC.

California is seeking a refund of $8.9 billion for what it contends are unjustified charges, which the state says can be clearly documented.

A consumer advocate echoed Davis’ outrage at the judge’s ruling.

“The notion that these power companies should get even a dime, rather than pay Californians back for the billions they stole, is baffling, absurd and outrageous,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

The response from Davis came as he took a break from his weeks-long effort to prepare a plan, due Jan. 10, for closing a record state budget gap that could total $30 billion.

Davis said the outcome of the battle over a power refund won’t affect the state’s general fund.

“Rest assured, the general fund is not at risk,” he said.

The state began buying power in January of last year after the two largest utilities, Pacific Gas & Electric and Southern California Edison, were driven deep into debt by a flawed state deregulation plan.

Under deregulation, the rates utilities could charge their customers were frozen, even as the prices they paid for wholesale power soared, amid charges the market was being manipulated by generators to increase profits.

More than $6 billion from the state’s general fund was spent to buy power last year. After a long delay, the general fund was repaid in October with money from the sale of $11.95 billion in bonds. The bonds will be paid off by ratepayers over two decades.

Davis said the utilities are scheduled to resume buying power directly on Jan. 1.

California is still struggling, with mixed results, to renegotiate $43 billion worth of overpriced, long-term power contracts obtained at the peak of the crisis.

Davis said the judge who issued the ruling yesterday was handcuffed by decisions made by the FERC in July 2001, before much of the evidence of market manipulation by the generators was revealed.

He said the administrative law judge “did all right,” given the unfair restrictions imposed by the FERC. Those restrictions would have allowed a maximum refund of $2 billion.

“I am determined as long as I am governor to do everything humanly possible

to get the money back that was stolen from our state,” Davis said.

The governor said the FERC erred by ruling a $3.4 billion overcharge to the state power-purchasing agency, the Department of Water Resources, couldn’t be considered because the state agency is not a utility.

He said the FERC also erred when it arbitrarily ruled $2 billion worth of overpriced power purchased before October 2000, when the FERC concluded the market was malfunctioning, couldn’t be considered for a refund.

In addition, California officials say FERC rules prevented the judge from considering recent disclosures that the price of natural gas, which fuels most power plants, had been manipulated.

Davis said President Bush should “step in and ask his appointees to do the right thing.” “He needs to tell his appointees to be fair to California.”

He said the FERC has ruled in favor of the generators and against California consumers in virtually all of the decisions it’s made.

“FERC ought to learn its job is to protect California consumers and businesses, not to make sure Enron, Reliant, Dynegy and Duke make a lot of money,” Davis said.

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The New York Times News Service contributed to this report.