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From: McEvoy, Bridget [mailto:Bridget.McEvoy@ElPaso.com] BN 18:06 Talks Between California, Generators End; No Accord (Correct) (Corrects lead to say judge recommended FERC hearings to result disagreements; adds comments from judge in fifth paragraph and comments from Enron in 13th paragraph.) Washington, July 9 (Bloomberg) -- A judge who oversaw two weeks of unsuccessful negotiations aimed at persuading power sellers to pay refunds in California and other western states recommended that the Federal Energy Regulatory Commission hold hearings to resolve disagreements within 60 days. Two weeks of FERC-ordered talks ended today with the two sides no closer to an accord. ``In 15 days, you can't work miracles,'' said Curtis Wagner, FERC's chief administrative law judge. ``The numbers were too far apart.'' California says it is due a refund of $8.9 billion because the companies charged excessive prices. Other western states are also requesting money. A group of power sellers offered $510 million to California during the negotiations, scoffing at the state's method of calculating the refund, Wagner said. Other parties to the talks offered about $206 million, bringing the total offer from generators to $716 million. On Saturday, the state brought in analysts who explained how the state calculated its estimate. He wasn't convinced by California's arguments that it should receive $8.9 billion, said Wagner, who wouldn't provide his own estimate of how much should be paid. Wagner said FERC should hold hearings of 60 days or less and should calculate a refund based on a system it approved for price caps on June 18. The caps are based on the costs of the highest priced generator during the early stages of a power shortage. That formula should be applied retroactively to Oct. 1, Wagner said. He wouldn't provide an estimate of the size of such a refund, saying it would require research into fuel prices from that time period. Michael Kahn, California's chief negotiator, said the judge's recommendation was a victory for his state. Wagner's formula would give his state a refund of ``several billion dollars,'' and California will sue to get the rest, he said. ``The judge said we're entitled to our money without releasing any of our claims,'' Kahn told reporters. Generators were mixed on what Wagner's recommendations meant, though they agreed the state asked for too much. ``Under the faulty methodology the state has come up with (to justify the $8.9 billion refund), we would be owed money because we bought more than we sold in the spot market in the period in question,'' said Mark Palmer, a spokesman for Enron Corp, one of the power sellers taking part in the negotiations. ``That's shows how ridiculous this is.'' Houston-based Enron didn't participate in the offer to refund $510 million, Palmer said, without being more specific. ``Nothing I've seen suggests that California cares about a settlement,'' Palmer said. ``What they care about is shifting blame. What they care about is a witch hunt.'' Duke Energy Corp. is ``very pleased'' by the judge's recommendations, said Brent Bailey, vice president and general counsel of the Charlotte-based company. The judge's plan fixes problems with California's methodology for calculating the refunds, he said. California's two biggest utilities have piled up almost $14 billion in debt because of the surging prices that resulted when the state's plan to deregulate its electricity system failed. The state began buying power on the utilities' behalf in January and has spent close to $8 billion. --Amy Strahan Butler and Jeff Bliss in Washington (202) 624-1975 or jbliss@bloomberg.net and in Washington/mmw/alp/mmw Bridget McEvoy Investor Relations El Paso Corp. 713.420.5597 Bridget.McEvoy@elpaso.com ****************************************************************** This email and any files transmitted with it from the ElPaso Corporation are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error please notify the sender. ******************************************************************
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