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Davis: $2 billion in rebates not good enough

The Associated Press
Monday June 25, 2001

SAN DIEGO – As an array of officials prepared to represent California in federally ordered talks with power companies, Gov. Gray Davis on Sunday discounted suggestions that the state will accept far less in electricity rebates than he believes it’s owed. 

“We’re going back to Washington with one goal, and that’s to get back $9 billion,” Davis said from San Diego in a telephone conference with reporters. 

California officials contend that power generators have overcharged the state and investor-owned utilities utilities $8.9 billion since last May. The companies argue that the charges, which have reached as high as $3,380 a megawatt hour, were justified. 

“Power providers have been taking advantage of our market; they gamed the system and ripped people off,” Davis said. 

On Monday, officials from the state, the utilities and the generators meet under orders from the Federal Energy Regulatory Commission to negotiate a settlement over the alleged overcharges. 

The talks will be overseen by Curtis Wagner Jr., FERC’s chief administrative law judge. Wagner said Friday that he was optimistic a settlement would be reached, but thought the amount would be closer to $2 billion or $2.5 billion. 

Davis said Michael Kahn, chairman of the California Independent System Operator, which manages the state’s power grid, will lead California’s negotiating team. Also taking part in the talks will be representatives of the Attorney General’s Office, the Public Utilities Commission and the Department of Water Resources. 

FERC has authority only over private power generators, but the state claims it also was overcharged by public entities — such as the Los Angeles Department of Water and Power and the trading arm of Canada’s BC Hydro. 

Davis senior adviser Nancy McFadden said a settlement with the private generators would give the state leverage with the others. “We need to use the forum that we’ve got available to us,” she said. 

Davis said the state will get a little more breathing room in the power grid over the next two and a half weeks, when three new power plants producing a total of nearly 1,400 megawatts are scheduled to go on line.  

A 320-megawatt plant near Bakersfield is set to begin operating Wednesday, and will be followed by a 500-megawatt plant near Yuba City and a 559-megawatt plant in Contra Costa County. 

The addition this summer of major power plants, smaller peaker plants and cleaner-burning “qualifying facilities” should add 4,000 megawatts to the state’s overburdened power grid by Sept. 30, Davis said. That expansion and ongoing conservation efforts will reduce the chances of rolling blackouts, he said. 

Davis also said that he will meet Monday with three former employees of one power generator, Duke Energy, who testified before a California Senate committee Friday. 

The former employees, who were laid off in April, say they were told to shut units down for unnecessary repairs in a scheme to drive up electricity prices. The company called the claims “baseless.” 


Developments in California’s energy crisis: 


— Gov. Gray Davis discounted suggestions that California will end up agreeing to rebates that are a fraction of what the state contends it is owed by power generators. California officials contend that power generators have overcharged the state and investor-owned utilities utilities $8.9 billion since last May. A top official with the Federal Energy Regulatory Commission said Friday that he thought a settlement could mean $2 billion or $2.5 billion for the state. 

— Davis said three new power plants totalling almost 1,400 megawatts of electricity should be on line in the next two and a half weeks. The first is a 320-megawatt facility near Bakersfield set to go on line Wednesday. 

— No power alerts Sunday as electricity reserves stay above 7 percent. Track the state’s blackout warnings on the Web at 


— Two Federal Energy Regulatory Commission commissioners say they will attend a California Energy Commission meeting Monday. 

— Davis plans to meet Monday with three former Duke Energy employees who say the power generator ordered unnecessary repairs to one plant in a scheme to raise prices. 

— Greenpeace Executive Director John Passacantando says he will deliver Davis a plane ticket Monday to attend global warming talks in Bonn, Germany, next month, as part of the environmental group’s demand for cleaner energy alternatives to help solve the state’s energy crisis. The effort is part of a new drive with other conservation groups dubbed Clean Energy Now. See 

— The state Senate continues to hold hearings on the Edison rescue deal. 

— Senate Select Committee to Investigate Price Manipulation sets a Thursday deadline for power generators to comply with document subpoenas or face contempt citations. 


High demand, high wholesale energy costs, transmission glitches and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance at aging California power plants are all factors in California’s electricity crisis. 

Southern California Edison and Pacific Gas and Electric say they’ve lost nearly $14 billion since June to high wholesale prices the state’s electricity deregulation law bars them from passing on to consumers. PG&E, saying it hasn’t received the help it needs from regulators or state lawmakers, filed for federal bankruptcy protection April 6. Electricity and natural gas suppliers, scared off by the companies’ poor credit ratings, are refusing to sell to them, leading the state in January to start buying power for the utilities’ nearly 9 million residential and business customers. The state is also buying power for a third investor-owned utility, San Diego Gas & Electric, which is in better financial shape than much larger Edison and PG&E but also struggling with high wholesale power costs. 

The Public Utilities Commission has approved average rate increases of 37 percent for the heaviest residential customers and 38 percent for commercial customers, and hikes of up to 49 percent for industrial customers and 15 percent or 20 percent for agricultural customers to help finance the state’s multibillion-dollar power buys.