Billions of dollars at stake as power talks begin
June 25, 2001
WASHINGTON (AP) Energy users and providers are billions of dollars apart in their estimates of how much the power crisis in the Western states has cost. The federal official overseeing confidential settlement talks wants them to come to terms quickly.
With just two weeks to reach agreement, Federal Energy Regulatory Commission chief administrative law judge Curtis L. Wagner said he wants all sides to start using realistic numbers when they meet Tuesday for the second day of negotiations.
“Now we’re getting ready to get down to brass tacks,” Wagner said Monday, after the first day of talks.
Led by California, Western states say power-generating companies overcharged 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. “We want our refunds. We want them now,” said Kahn, chairman of the California Independent System Operator, which manages the state’s power grid.
The states claim that the companies unfairly drove up prices to take advantage of a power shortage. Prices frequently surpassed $300 a megawatt-hour, 10 times what they were in 1999. One megawatt is enough to power about 750 homes.
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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 attributed the states’ claims to the rhetorical flourishes that often accompany the start of negotiations. “Everybody has to stick to their guns for a while,” he said.
The judge, who is playing a mediator’s role in the negotiations, said he has seen nothing to change his previously stated view that refunds in any settlement probably would not exceed $2.5 billion.
He cautioned all sides that a brokered settlement would be preferable to a plan he would recommend to federal regulators should talks fail.
More than 150 people representing about six dozen entities gathered in a government hearing room for negotiations. The talks were one result 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 and prosecution, he said.
The parties also have to try to reach agreement on additional long-term power contracts, which would reduce the amount of power California would have to purchase on the volatile spot market.
The attendees included representatives from California and a dozen city and county governments, investor-owned and municipal utilities, power generators and natural gas companies.