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Agency used water funds for purchase of electricity


(Published February 7, 2001) SACRAMENTO -- Before lawmakers passed two emergency bills giving the state Department of Water Resources roughly $1 billion to buy electricity, the agency already had purchased power with hundreds of millions of dollars that had been earmarked for water-related projects.

DWR Director Tom Hannigan told a committee of lawmakers Tuesday that the agency may need to dip further into those funds before the state is ready to issue up to $10 billion in revenue bonds for electricity purchases. He said the delay could be up to three months.

At least $150 million was tapped from the water agency's budget to buy power after Gov. Davis issued an emergency proclamation Jan. 17 granting it authority to buy large quantities of power in place of the struggling utility companies. That money was drawn from funds set up for flood-control projects, the state and federal water plan known as the Cal-Fed Bay-Delta program, and a canal-lining project in Southern California.

Hannigan told members of the Senate and Assembly water committees that so far, using those funds to buy power has not affected projects for which those dollars were intended.

He said the goal is to reimburse the accounts before there's an actual demand for the money, which could be in mid- to late summer.

Before Davis' emergency declaration, the Department of Water Resources siphoned off $38.5 million from its State Water Project fund to make electricity purchases on short notice. It made those buys at the request of the Independent System Operator -- which manages the state's electrical grid -- when ISO's electricity reserves reached dangerously low levels between from December to mid-January.

None of that money -- essentially dollars that farmers and urban users of the State Water Project overpaid for their water allocation last year -- has been replenished. That's made farmers in the southern San Joaquin Valley, who are already edgy about a grim water forecast, even more nervous.

When and how all the agency's funds will be restored and whether water-related projects will take a back seat to procuring power also has lawmakers concerned, especially given the uncertainty of when the state will have cash available through its sale of bonds.

"The bottom line is that under emergency powers, there is a tremendous amount of flexibility for the governor," said Sen. Jim Costa, D-Fresno, chairman of the Senate Agriculture and Water Committee. "But we do want to move forward on a host of flood-control projects. Important efforts need to be made to provide additional water reliability in case of a drought and some of the Cal-Fed monies could provide short-term benefits for that purpose."

Wants numbers

Costa asked Hannigan to regularly account for the Department of Water Resources' power expenditures as it becomes permanently involved in buying and selling electricity in California.

State Sen. Chuck Poochigian, R-Fresno, the committee's vice chairman said: "It's important for us to stay on top of it. Not because of suspicion that there's wrongdoing, but because of the nature of the situation. The risk is not that people won't keep their word. But in a worst-case scenario, and I hope and pray we don't get there, anything can happen."

Several committee members, including Assembly Member Dean Florez, D-Shafter, hinted that bills should be drafted to ensure all those water-related accounts are replenished.

Said Florez: "Those accounts have to be paid back before we buy any more energy with them."

The reporter can be reached at or (916) 326-5541.,1724,237144,00.html

-- Martin Thompson (, February 08, 2001


And another twist in the California Mess.

-- Martin Thompson (, February 08, 2001.

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