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SACRAMENTO — The Davis administration is putting the final touches on a plan to assure refunds to San Diego ratepayers hit by this summer’s dramatic rise in electricity costs. 

The proposal, which requires Federal Energy Regulatory Commission approval, was expected to be released at a Tuesday hearing in San Diego called by FERC. 

The hearing marks what is likely to be the final opportunity for California authorities to plead their case to the commission before it issues a much-anticipated order detailing its actions – if any – to ease California’s troubled, deregulated electricity market. 

Gov. Gray Davis plans to testify, accompanied by Loretta Lynch, chairwoman of the state Public Utilities Commission, and other officials. 

At issue is whether FERC, which earlier said that San Diego-area ratepayers paid unreasonable costs for electricity, has the authority to force the wholesalers and marketers to refund the excess charges, perhaps $1 billion worth. 

The commission has said it cannot order such refunds without congressional authorization. Davis and other California officials say that isn’t true, and they hope to persuade FERC to take action. 

They also believe that any refunds should reflect the doubling and tripling of ratepayers’ bills that took place this summer. The commission, however, has suggested excess charges before Oct. 1 likely would not be targeted by refunds, if any ultimately were ordered. 

The Davis administration’s plan will likely include some form of cost controls and a mechanism for refunds.  

Davis spokesman Steve Maviglio said the administration would have an internal briefing on the proposal Monday. 

The dispute goes to the heart of California’s electricity market, deregulated under a 1996 law that sought to lower costs by adding competition to a system that was dominated by monopoly utilities limited by law as to how much they could charge their retail customers. 

The law required investor-owned utilities to sell off assets by March 2002, including power plants, and buy their power on the open market. 

San Diego Gas and Electric Co., with 1.2 million customers, was the first utility to complete the transition to deregulation. Its rate freeze was lifted and it bought power at competitive prices, then distributed it to its customers. 

Then the cost of wholesale electricity climbed sharply, and SDG&E passed those increases on to its customers. The spiraling costs prompted a political outcry, investigations and demands by consumer groups and state and local officials for cost controls. 

So far, those increases have been limited to the San Diego area. 

The state’s two largest power utilities, Pacific Gas and Electric Co. and Southern California Edison Co., face a similar situation when they complete the transition to deregulation, perhaps as early as next year. 

PG&E has gone to a federal court to seek permission for such increases, and it is likely that SoCal Edison will follow. 

The Davis administration’s goal is two-fold: getting refunds for those in San Diego buffeted by the price spikes preventing comparable increases throughout the state.