DWP TO SUE IF IT'S FORCED INTO REFUNDS.

Byline: Dana Bartholomew Staff Writer

Los Angeles Department of Water and Power officials threatened on Thursday to sue if federal officials ordered them to refund hundreds of millions of dollars from energy sales to the state.

The DWP and other public utilities that helped light California during the energy crisis this winter said what they've repeated for months: They've never ripped off the state.

``The DWP has never gouged the state by charging excess prices,'' DWP spokesman Eric Tharp said following a Federal Energy Regulatory Commission decision to order a full hearing and refund of some part of DWP's $850 million in surplus power sales over the past year.

``If they're trying to force us to refund money, we'd probably take appropriate legal action,'' Tharp said.

Other utilities also defended high wholesale power prices driven by exorbitant natural gas costs, pollution credits and the expense of firing up older plants.

``Victims don't give refunds,'' said Fred Fletcher, assistant director of the Burbank Department of Water and Power, which just hike rates 10 percent. ``We're wondering why no one's protecting our ratepayers for the outrageous costs they've had to incur because of these high prices.

``There's been absolutely no protection at all from the governor, Legislature or FERC.''

Glendale utility officials did not respond to a request for comment Thursday.

The response by public utilities follows a FERC order Wednesday for a full hearing on the refund issue. A state legislative committee is also investigating prices charged the state by municipal utilities.

The commission said municipal utilities - by law not covered by the Federal Power Act - will have to refund their share of overcharges along with private power generators.

The order responds to a demand by Gov. Gray Davis that generators return $8.9 billion in overcharges to California although the FERC administrative judge in the case ruled that the state actually was entitled to about $1 billion in refunds.

Davis had also threatened to seize power from Los Angeles and other cities if they didn't lower prices, but now with a temporary surplus is selling power to the DWP and others at a fraction of the price the state paid.

An analysis of spot-market power purchases by the state between January and March found public utilities charged $344 per megawatt hour while private companies charged less than $250.

While it costs more for public utilities to generate power, public utility officials say costs were also hiked by state requests to public utilities to use good credit to buy power from private generators, tack on a 10 percent surcharge and sell it to the state.

Of the $850 million in surplus power sales by the DWP, $370 million was sold at an average price of $292 per megawatt hour to a state water agency charged this year with buying power for California's private utility customers. The remainder was sold to the California Independent System Operator and the now-bankrupt Power Exchange.

``It's going to be real interesting to see where (public utilities) will get refunds when most of our utilities have had to raise rates,'' said Jerry Jordan, executive director of the California Municipal Utilities Association, which represents 31 public utilities, including the DWP.

Public agencies responded to a crisis, he said, ``then got slammed by the governor.''