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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



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