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Tuesday May 29, 8:34 pm Eastern Time

Calif. Gov. Davis threatens to sue FERC

By Nigel Hunt

LOS ANGELES, May 29 (Reuters) - Californians: get ready for a summer of low-voltage high drama.

Gov. Gray Davis emerged in a fighting mood on Tuesday from a disappointing meeting with President George W. Bush on the state's energy crisis. He vowed, if needed, to 1. go to court, 2. slap a heavy tax on windfall profits and 3. seize plants to stop the price gouging he says is draining the state's coffers to pay for electricity.

Bush refused Davis's plea for price caps on the cost of wholesale electricity and the governor threatened to sue federal regulators whom he believes have failed to ensure that prices are ``just and reasonable'' as required by U.S. law.

``I will sue the Federal Energy Regulatory Commission (FERC) if I don't get relief from them,'' he told a news conference following the meeting with Bush.

California is expected to spend $50 billion this year to secure the electricity needs this year, up around seven-fold from just $7 billion in 1999.

``The market has gone haywire,'' Davis said.

A chronic shortage of electricity has not only led to soaring prices but has also several times this year forced the imposition of rolling blackouts across the state.

Davis, a Democrat, believes the federal regulators should cap prices with the extra cost of power posing a serious threat to California's and the nation's economy. Bush, a Republican, opposes price controls, saying they will do nothing to improve the situation.

Federal regulators last month offered some conditional price relief which would only apply during severe shortages. Davis was among the sharpest critics of the FERC plan.

FERC FILING

Davis said he had made a preliminary filing with FERC on Friday supporting his view that they should impose price controls on the wholesale power market.

``I have to give them sometime to review that information,'' he said, noting administrative remedies had to be exhausted before a lawsuit could succeed.

Earlier on Tuesday, a federal court turned down a suit brought by California state Senate President Pro Tem John Burton and Assembly Speaker Robert Hertzberg, both Democrats, saying they ``have not demonstrated that this case warrants the intervention of this court.''

The governor has repeatedly said out-of-state generators, some based in Bush's home state of Texas, have contributed to the crisis, reaping huge profits at California's expense.

He said that companies have to act like ``good corporate citizens'' or face consequences. ``Their fate is in their hands. If they don't cooperate I will have no choice but to sign a windfall profits tax or seize plants,'' he said.

Under the terms of California's failed experiment with deregulation, the state's investor owned utilities were encourage to sell their power plants. Most were bought by out-of-state power companies such as Reliant Energy Inc. (NYSE:REI - news) and Dynegy Inc. (NYSE:DYN - news), both based in Houston and Atlanta-based Mirant Corp. (NYSE:MIR - news).

-- (in@energy.news), May 30, 2001

Answers

http://kfwb.com/news/local/l053010.html

Davis Says FERC Has 30 Days To Act Before He Sues

SACRAMENTO (AP) -- Gov. Gray Davis said Wednesday that he'll give federal energy regulators at least 30 days to respond to his requests for massive electricity rebates or rate cuts before taking them to court.

He indicated that a lawsuit was likely. "I'm sure they won't do as much as they need to," he told reporters after a speech to the California Small Business Association.

He said he wanted to give the Federal Energy Regulatory Commission time to consider his filings before going to court, saying judges are "reluctant to tell agencies what to do until agencies review the matter."

FERC has already ruled that wholesale energy prices charged California utilities and the state were not just and reasonable. State power officials estimate that the state was overcharged $6 billion for power in the last year. But so far FERC has ordered only $124 million in refunds.

Davis says the state deserves either substantially more in refunds or price controls.

He said he was willing to accept a formula that would let power generators make up to 50 percent in profits, saying that would still be less than they are taking in now.

"We are getting picked apart by excessively greedy energy companies who are selling us energy at literally at 600 or 700 percent more than we paid for it in 1999," he told the business group.

He said he told President Bush when they met Tuesday in Los Angeles that California was "entitled to relief as a matter of law," but Bush refused to support price caps.

But the president did agree to send FERC member Pat Wood to meet with Davis.

The Democratic governor said he had talked to Wood and that Wood was "open to making substantial refunds."

"I know I am talking to a kindred spirit when I talk (to Wood) about more refunds," Davis said.

5.30.01, 3:20p

-- (in@energy.news), May 31, 2001.