Davis Asks for Energy Refund Help
California Gov. Gray Davis, seeking to shift the focus of the energy debate, urged Congress on Wednesday to turn up the political heat on federal regulators to help California recover $9 billion in estimated overcharges by power generators.
Davis told a Senate panel that the order issued Monday by the Federal Energy Regulatory Commission to limit Western electricity prices was “a step in the right direction.” But more aggressive action is needed, he said, to “give us back the money that was wrongly taken from us.”
Davis’ remarks to the Senate Governmental Affairs Committee suggest that the political warfare between Sacramento and Washington did not end with FERC’s decision to police wholesale electricity prices more aggressively.
By demanding federal intervention to recover money already paid to power generators, Davis continued to insist that the Bush administration and federal regulators must share responsibility for solving the state’s energy problems.
“Yes, they have provided some relief,” Davis said of FERC’s price mitigation mandate. “But that’s only half the job. The other half of the job is give us back the money that was wrongly taken from us.”
On his first trip to Capitol Hill since Democrats took control of the Senate, Davis appeared before a Governmental Affairs Committee that displayed more sympathy toward his administration than it did when Republicans ruled it.
One committee member, fellow Democrat Robert Torricelli of New Jersey, bluntly warned FERC: “We are watching how the people of California are treated, and we are watching very, very closely.”
Davis noted that federal regulators have already determined that wholesale power rates charged to California were “unjust and unreasonable.” Even so, he said, “not a single penny in refunds has been returned to California.”
Governor Calls Rates ‘Egregious’
“It’s unconscionable if generators are allowed to keep these egregious overcharges,” Davis said, imploring the committee to “hold FERC’s feet to the fire.”
California’s electricity grid operator has calculated that the state paid about $9 billion more than a competitive market would warrant for electricity from May 2000 to May 2001. So far, FERC has only identified about $124 million in possible overcharges, which were confined to January and February.
To some extent, FERC has already agreed to play a bigger role in seeking refunds, although not necessarily the full $9 billion that Davis is seeking.
Next week, representatives of the state, electric utilities and power generating companies are scheduled to begin talks in Washington on possible refunds.
The settlement conference, which begins Monday, is scheduled to run for 15 consecutive days, including weekends, which is unusual for a regulatory proceeding.
Presiding over the conference will be Chief Administrative Law Judge Curtis L. Wagner Jr., who admonished participants Wednesday to make sure that they send representatives who have authority to approve any agreements reached during the negotiations. Wagner can extend the conference if necessary.
The purpose of the conference is to settle past accounts and structure “new arrangements for California’s energy future,” Wagner said in a scheduling order. To reach those goals, the parties must agree on how much of the electricity load will be shifted away from the volatile spot market for immediate delivery into stable, long-term contracts, refunds and “credit-worthiness matters,” the order said.
Edison General Counsel Stephen E. Pickett said the utility is pleased that regulators set up the meeting with power generators to discuss refunds to the utilities dating back to Oct. 2.
“Certainly, it is a positive step toward resolving many of these issues,” Pickett said in a conference call Tuesday with creditors.
San Diego Gas & Electric expressed similar muted optimism.
“SDG&E; has been a supporter of customer refunds, and we’re encouraged that the FERC is working toward a settlement,” SDG&E; spokesman Art Larson said.
But Reliant Energy spokeswoman Pat Hammond expressed skepticism about the $9-billion overcharge figure cited by Davis. “That number sounds like the price of all the power they’ve bought in the last year in California, and we obviously don’t feel that is owed” by Reliant and other power producers.
Donato Eassey, a Houston-based energy analyst for Merrill Lynch, said he expects the FERC-mediated conference to produce a compromise in which all parties--generators, utilities and consumers--get “a haircut.” But that outcome, he suggested, might beat the alternatives.
“You’ve got to put this problem behind you,” he said, “because if you don’t, you’ll have a problem of biblical proportions.”
FERC Members Also Before Senate Panel
Adding to the pressure for refunds, Sen. Barbara Boxer (D-Calif.) introduced a bill Wednesday that would require FERC to order rebates if federal regulators determine that prices charged were “unjust and unreasonable.”
The five members of FERC’s governing board also appeared Wednesday before the Senate panel but were scheduled later in the day to avoid a public confrontation with Davis.
The governor met privately Wednesday with two new board members, including Patrick H. Wood III, a Bush ally from Texas who, according to Davis, has indicated a “more aggressive approach to refunds might be in order.”
Still, there was no shortage of partisanship at the committee hearing.
Republican aides passed out hand-held fans bearing the inscription: “Gray Davis’ solution for summer blackouts.” Davis handed out a slick 177-page book detailing steps his administration has taken to ease the power crunch. The Bush administration issued a Department of Energy study asserting that California would face twice as many rolling blackouts if hard price caps were imposed on wholesale electricity.
Davis did not escape a scolding from Republican senators for his criticism of the Bush administration’s refusal to impose firm price controls.
Sen. Fred Thompson (R-Tenn.) pointedly asked Davis “how he let things get totally out of hand” and excoriated the governor for assigning blame for the state’s problems to the Bush administration, federal regulators, former Gov. Pete Wilson and various “corporate pirates.” He also faulted Davis for not acting sooner to pass on higher wholesale costs to consumers.
“If I passed on a 700% increase to the citizens of California, there would be an outrage the likes of which you have never seen,” Davis responded.
Republican senators also challenged Davis on how he hopes to stimulate more power plant construction in California if state officials continue to attack generating companies. They noted that the state attorney general even suggested that the chairman of one power company deserved to be locked in a cell with an amorous inmate named Spike.
“This is a rough business,” Davis responded. “The people I represent are mad.”
He also told his Republican critics: “If you were in my shoes and facing the extraordinary price increases, you would feel as I do. Our first obligation is to fight back.”
Davis urged the committee to keep pressure on FERC to rein in natural gas prices, which until recently have been as much as eight times higher than the national average.
FERC Chairman Curtis L. Hebert Jr. assured the committee that his agency is aggressively pursuing remedies to California’s energy price spikes and supply shortages. “We have been engaged,” he said, citing more than 60 orders issued by the agency to address the power crisis.
Commissioner William L. Massey, a Democrat who has urged stronger federal intervention in the electricity markets, said he regrets the commission did not act sooner.
“Businesses have closed down, putting thousands out of work and hurting the Western economy, and all because of a broken electricity market,” he said. “By acting 10 months ago, we could have prevented much of the economic carnage.”
Despite the tensions, Davis elicited some sympathy from even his Republican critics.
“I wouldn’t wish your problems on my worst enemy,” Thompson told Davis.
*
Times staff writers Nancy Rivera Brooks in Los Angeles and Thomas S. Mulligan in New York contributed to this story.
