Billions at stake as power talks start

The Associated Press
Tuesday June 26, 2001

Efforts to settle claims from the California power crisis got under way Monday, as Western states accused power-generating companies of overcharging them by $15 billion in the past year. 

Michael Kahn, California’s chief negotiator, said the $9 billion in refunds his state claims it is owed should be the first order of business for Curtis L. Wagner, the Federal Energy Regulatory Commission’s chief administrative law judge, who is serving as mediator for the talks. 

“We want our refunds. We want them now,” said Kahn, chairman of the California Independent System Operator, which manages the state’s power grid. 

Other Western states, mainly in the Pacific Northwest, said overcharges to them amount to $6 billion. 

The states claim that the companies unfairly drove up prices to take advantage of a power shortage. Prices frequently surpassed $300 a megawatt-hour, ten times what they were in 1999. One megawatt is enough to power about 750 homes. 

The power companies argue that the charges were justified.  

In some cases, older, more costly power plants were pressed into service to deal with the high demand and tight supply. 

Wagner, who has said that refunds in any settlement probably would not exceed $2.5 billion, urged all sides to be conciliatory.  

He said a brokered settlement should be preferable to a plan crafted by federal regulators. 

He said he was not discouraged by the states’ hard line in the early going. “Everybody has to stick to their guns for a while,” Wagner said after the first day of talks. 

More than 150 people representing about six dozen entities gathered in a government hearing room for negotiations.  

The talks were part of a federal order last week extending price controls on spot power sales in California and imposing limits in 10 other Western states. 



Wagner laid out several issues negotiators will have to tackle, including how much generators are owed for power they supplied to California without getting paid. 

The size of the refunds and the unpaid bills “must be, both ways, resolved at the outset to put everyone on the same playing field,” Wagner said. Any settlement probably would also have to answer whether the generators should have immunity from existing and future lawsuits, as well as prosecution, he said. 

Other issues on the table include: 

— Additional long-term power contracts, reducing the amount of power California would have to purchase on the volatile spot market. 

— Ensuring a credit-worthy party to pay for power. 

— Natural gas prices and pipeline capacity, particularly in Southern California. 

— The independence of the board that governs the Independent System Operator. 

— The bankruptcy of Pacific Gas & Electric. 

Wagner wore a gray business suit and sat among the parties, foregoing both his robes and his seat on the dais, to emphasize his role as a broker in the talks. 

Reporters sat in on Wagner’s opening statement and a marathon introduction in which some 150 people stated their names and their employers. 

“If we had known there would be so many people here, we would have sold tickets,” Wagner said. 

The attendees included representatives from California and a dozen city and county governments, investor-owned and municipal utilities, power generators and natural gas companies. 

After the introductions, Wagner closed the meeting to the public, ordering the participants not to talk to reporters during the negotiations. He even pledged to shred his copy of the notes that a court reporter will transcribe each day. 

FERC mandated that the talks last no more than 15 days. Wagner can request more time if he feels progress is being made. 


On the Net: 

Federal Energy Regulatory Commission: http://www.ferc.gov/