http://dailynews.yahoo.com/h/ap/20010621/pl/power_parley_1.html

Thursday June 21 1:39 AM ET

Showdown Next Week in Energy Wars

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON (AP) - Power producers in California say they've been stiffed for billions of dollars in unpaid bills, while state officials retort that their citizens have been bilked of as much as $9 billion in illegal overcharges.

It has been one rhetorical salvo after another in the yearlong Western electricity wars - and the shooting could get even worse.

Next week the feuding parties are to gather in a single room under a federal order and try to work out agreements that could determine how billions of dollars will be divided.

The prospects for early success are at best uncertain, and some skeptics have said privately that the conference - given the bitter antagonism among some of the participants - is doomed to fail.

The Federal Energy Regulatory Commission (news - web sites) this week directed the settlement conference to try to resolve the various financial disputes arising from the West's power problems. FERC called the meeting as part of its order imposing limited price caps on Western electricity sales.

No one is quite sure what will happen, the participants acknowledge.

It's not even clear who can participate.

FERC originally limited it to California. But commissioners said Wednesday that representatives from Washington state and Oregon also may join because of the clamor over alleged overcharges in the Pacific Northwest, where electricity prices have rivaled those of California.

Despite the uncertainties surrounding the conference, one thing is for sure: It is the first step in trying to unravel the financial can of worms left over from a year of soaring electricity prices, power shortages, market gamesmanship and extraordinary power company profits that has unleashed economic havoc from San Diego to Seattle.

The parties are being given 15 days to work out an agreement. If they don't, FERC Chairman Curtis Hebert says, the agency's chief administrative law judge will write an agreement and recommend it to the full commission for action.

FERC has the authority to order refunds and take other actions to resolve the financial disputes, but up to now has been criticized for not doing so aggressively.

FERC Commissioner William Massey, who has clashed frequently with Hebert over the handling of the California power crisis, said the commission should have provided more rules and guidance for the participants.

Hebert countered that the lack of stringent guides, along with a firm deadline, will help - not hinder - compromises. ``That's the beauty of this settlement conference,'' insisted Hebert when asked about it at a Senate hearing Wednesday.

The parley will pit power generators' lawyers and accountants against the accountants and lawyers representing the state of California, the state's grid managers, and the state's financially strapped utilities that have been driven into or near bankruptcy because of high power costs.

On Wednesday, California Gov. Gray Davis (news - web sites) unleashed a pre-settlement conference offensive in the war over refunds. Californians are owed at least $8.9 billion in overcharges for wholesale electricity sales dating back to May 2000, he maintained.

Singling out the out-of-state power producers whose profits have soared over the last 18 months, Davis said: ``They must be required to give us back our money.''

It's essential, he said, that California officials make a strong case for these refunds at Monday's settlement conference in Washington.

But the power companies have called California's refund claims wildly exaggerated and have disputed even FERC's comparatively modest estimate of overcharges - $124 million during the first four months of the year - in a series of filings with the agency.

``There has been no evidence to suggest that suppliers bilked anyone,'' said Mark Stultz, a vice president of the Electric Power Supply Association, responding to Davis' allegations.

The association represents independent and merchant power companies and marketers such as Duke Energy, Mirant, Reliant Energy and Enron, all of which have profited handsomely from the Western electricity crunch.

To these companies, overcharges and the clamor for refunds is only half the story: There still are the billions of dollars yet to be paid for past power sales to California's ailing utilities.

Pacific Gas & Electric, which has declared bankruptcy, and Southern California Edison (news - web sites) together still owe the generators about $2.5 billion for past electricity sales, Davis acknowledges.

The case of Mirant is typical.

The electricity generator, which once was part of the Atlanta-based Southern Co., has been accused of overcharging customers by at least $2.2 million.

``We still think most of those charges can be justified,'' said Mirant spokesman Buddy Eller. Even so, he added, Mirant also is keen on collecting $385 million it is owed for past electricity sales.

It is just such financial entanglements the settlement conference is designed to unravel, according to FERC commissioners.

``There is going to be a lot of issues on the table ... and a good bit of horse trading,'' predicted Stultz, the industry trade group spokesman.

-- Wish (them@good.luck), June 22, 2001