California got no relief Wednesday from the Federal Energy Regulatory Commission, which refused to void $12 billion worth of high-priced power contracts with Sempra Energy, Dynegy Inc., Mirant Corp. and other companies that are accused of manipulating power prices.

While most of the original $43 billion in long-term contracts signed by Gov. Gray Davis in 2001 have been renegotiated or have expired, state officials had pressed FERC to let California out of the remaining contracts after presenting evidence that prices in the state's power market were artificially inflated by "gaming" strategies employed by power sellers.

But in an order read by FERC Chairman Pat Wood, the commission cited a lack of credible evidence that the contracts "are placing the complainants in financial distress or that other customers will bear an excessive burden."

The commission upheld the contracts by a 2-1 vote, with Commissioner William Massey dissenting.

"The Western markets were severely dysfunctional, out of control," Massey said. "It seems clear that the dysfunctional California spot market had an effect" on prices.

Davis and other state officials denounced the ruling, saying they would sue for relief.

"Today, FERC Chairman Wood and Commissioner (Nora) Brownell fulfilled the promise they made to the energy industry in a private conference call, before they heard any evidence, that they would not reform California's long-term contracts," Davis said. "In doing that, Commissioners Wood and Brownell ignored their own staff report, which found widespread manipulation."

Even as it upheld the disputed contracts, FERC ordered 60 companies to prove that they did not violate California's power-market rules during the state's 2000-2001 energy crisis. It also banished bankrupt Enron Corp. from selling power at market-based rates, in an action Wood termed a "death penalty."

In addition to power sellers such as Dynegy, Mirant and Duke Energy, those also ordered Wednesday to rebut charges of price manipulation included local utilities Southern California Edison, the City of Anaheim, the Los Angeles Department of Water and Power and San Diego Gas & Electric.

Hearings will be held to examine evidence of "gaming" and "anomalous market behavior," Wood said. The companies may be forced to refund profits if found guilty.

An SDG&E spokesman said the company looks forward to "a full hearing on all the facts."

The inquiry could result in additional refunds for Californians, because it widens the period that FERC will scrutinize to include trades that took place before October 2000.

Edison said it "has not engaged in the gaming tactics FERC is investigating."

SEMPRA CONTRACT

The largest of the disputed contracts, worth more than $6 billion over 10 years, is with San Diego- based Sempra Energy, parent of SDG&E. Sempra officials hailed FERC's decision. "We have invested more than $1 billion in new power- generation projects to help meet our obligations under this agreement and have delivered every megawatt contracted by the state," said Sempra chairman Stephen Baum. V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies Sacramento, said the worst of the contracts is Sempra's because of "take or pay" provisions requiring the state to pay for power even when it doesn't need it. "For us, the take-or-pay provisions were even worse than the total value of the contract."

Davis in early 2001 announced the state had signed 40 contracts to buy $43 billion in electricity from more than 20 companies over 20 years. The California Public Utilities Commission challenged the contracts in early 2002, saying customers were overcharged by up to $21 billion.

The state had settled disputes over the contracts with suppliers including Calpine, Williams Cos., Constellation Energy Group and Allegheny Energy Inc. Contracts upheld Wednesday included ones with Dynegy, Mirant and Morgan Stanley.

The costs of the contracts are passed along to ratepayers through their utility bills. "This unfortunate ruling could cost California billions of dollars if it is allowed to stand," Sen. Dianne Feinstein said in a statement.

"We stand by our record of running our plants as hard as possible to meet demand during the shortages of 2000 and 2001," Dynegy spokesman David Byford said.

FERC didn't take any action Wednesday on refunds California claims it is owed by power sellers for short-term purchases made during the crisis. FERC officials have previously indicated California will get about $3.3 billion, far less than the $8.9 billion Davis and state officials say the state was overcharged.