Little Progress on Energy Rebate, Judge Hints

By RICARDO ALONSO-ZALDIVAR

July 6, 2001 12 AM PT

TIMES STAFF WRITER

WASHINGTON —

The federal mediator seeking a settlement for billions of dollars in alleged electricity overcharges in California signaled Thursday that the talks are in trouble, and analysts said hope for a deal seems to be fading.

Curtis L. Wagner Jr., chief judge of the Federal Energy Regulatory Commission, said he may issue a report on the closed-door talks as early as today if he sees no progress.

“The judge will perhaps issue a preliminary assessment of the talks,” said Tamara Young-Allen, a spokeswoman for FERC. “He will do this only if he feels the talks aren’t moving along as he sees fit.”

Originally, a preliminary report from the judge was not part of the plan.

Wagner had previously said all sides would labor in private through the weekend to try to get a deal by Monday’s midnight deadline. If that failed, the judge said he would take seven days to craft a proposed settlement for FERC’s governing board.

Kit Konolige, a power industry analyst with Morgan Stanley in New York, said Wagner’s announcement on Thursday amounted to a judicial distress signal.

“The judge wouldn’t say something like this if the parties were close to a settlement,” said Konolige. “I suppose he may be trying to jump-start things, but I think most people believed the sides were so far apart going into the talks that it seemed like a long way to go to reach a settlement.”

Although Wagner has imposed a gag order on participants, several people with knowledge of the negotiations said Thursday that major power generators and California officials have not budged from dug-in positions since the talks began last week.

They also said the judge is extremely frustrated with the state and with several large power suppliers.

California is demanding $9 billion in refunds. According to sources, the generators have offered less than $1 billion. And some major power sellers are insisting they do not owe anything.

Many experts say California has little hope of obtaining the $9 billion since only $5.4 billion of that is attributable to sellers under FERC’s jurisdiction. On the other hand, it seems clear from statements by FERC commissioners that the board is prepared to extract significant refunds from generators.

Wagner is said to be probing for a compromise figure between $1 billion and $9 billion. It could take the form of a mix of cash payments and discounts on long-term contracts for power.

FERC’s governing board ordered Wagner to hold the talks to see if a compromise could be struck on three big issues: refunds, guarantees that generators will be paid, and ways to shift more of the state’s power purchases to long-term contracts.

The board also made clear that it would impose its own settlement if the state and power sellers were unable to come to an agreement.

Wagner said Thursday that if he issues a preliminary report today, he will give all the parties a chance to respond publicly on Monday. Such a report might embarrass some of the key players, since Wagner is known for his plain-spoken conclusions. The judge would then prepare a settlement recommendation for the FERC board by July 16.

However, he also said he is willing to work through the weekend to reach a settlement if it appears within striking distance.

The talks are in a large hearing room on the second floor of the FERC building near Washington’s Union Station. Access is strictly controlled and special badges have been issued to the more than 140 lawyers participating.

Some people with knowledge of the negotiations said Wagner’s threat to issue a report may be a bid to see if one of the parties will make a move.

“It was like a shot across the bow,” said one source.