State Doubtful FERC Will Grant Refund Request

Times Staff Writer

California officials voiced skepticism Tuesday that the Federal Energy Regulatory Commission will grant the state’s demands for $8.9 billion in energy-crisis electricity refunds, and vowed to push ahead in court if that’s the case.

Meanwhile, Sen. Barbara Boxer (D-Calif.) released a short transcript Tuesday of two energy traders discussing how their company increased California power prices by withholding electricity -- part of what Boxer called the state’s “irrefutable case” for refunds. The transcript provides a glimpse of the potentially embarrassing disclosures awaiting energy companies in documents that FERC expects to make public at its meeting today.

At the same time, the three FERC members are scheduled to decide whether the state was overcharged for electricity by power sellers during the energy meltdown of 2000-01 and whether California can cancel or renegotiate about $20 billion in long-term electricity contracts signed during the crisis.

FERC also will issue a final report on whether Enron Corp. and other companies manipulated energy markets in California and other Western states.


FERC has said it intends to release most of the documents from manipulation investigation as well as evidence that California agencies and utilities submitted to bolster its contention that $8.9 billion in refunds are warranted because of widespread market gaming.

“We have heard some rumors ... that FERC may be upping the [refund] number, but not to the amount that we think California is entitled to,” said Erik Saltmarsh, acting executive director of the Electricity Oversight Board, one of the state agencies pushing California’s claim.

Richard Katz, a senior advisor to Gov. Gray Davis, said state officials are prepared to appeal an unfavorable decision to the 9th Circuit Court of Appeals.

FERC administrative law judge Bruce Birchman ruled in December that the state is due $1.8 billion in refunds. But Birchman did not consider charges of market manipulation or a FERC staff recommendation that a different method be used for calculating refunds.


The document released by Boxer is a previously undisclosed transcript of a recorded conversation between traders for Reliant Resources Inc., which agreed in February to pay California $13.8 million for withholding power and trying to manipulate electricity prices on June 21 and 22 in 2000. Conversations between energy traders are routinely recorded.

In the transcript, the traders discuss how the Houston-based energy supplier caused spot market prices to rise by $400,000 by turning off power plants. According to the transcript of the conversation on June 22, one unnamed Reliant trader told the other, identified as Joe Knauth, that the company appears to have increased prices.

Replied Knauth: “I got $400,000 ... from the expost that says that we did.” Expost refers to the spot market for electricity.

Reliant officials could not immediately be reached for comment.

Wall Street analysts are betting that the regulatory commission will order no more than $3 billion or $4 billion in refunds and will order California to honor the power contracts it signed in early 2001.

Energy stocks rose Tuesday partly on the expectations of “positive regulatory decisions” from the FERC meeting, said Craig Shere, energy analyst with Standard & Poor’s, the Wall Street credit-rating firm.