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California Capsule: Call for Contract Disclosure Grows

LCG, March 14, 2001--A top California official said yesterday that Gov. Gray Davis was mortgaging the state's future by committing billions of dollars to energy fixes and called on state Controller Kathleen Connell to begin an immediate audit of all energy-related financial transactions.

"There is no accountability and no oversight to ensure that the taxpayers' money is being spent wisely," California Secretary of State Bill Jones said. "The enormous outlays of money to purchase energy on a daily basis, as well as these binding, long-term contracts, will have a tremendous fiscal impact on the state for years to come."

Jones was referring to $45 million the California Department of Water Resources is spending each day on the volatile wholesale spot market to purchase power for the state's nearly insolvent utilities to deliver to retail customers and to the long term contracts negotiated over the last couple of weeks with independent power producers for delivery of power as far in the future as 20 years. Those contracts add up to more than $40 billion.

Republican legislators and the state's news organizations have urged Davis to make the financial details of the contracts public and last month Connell said she would publish the information on a Website, but she backed off after the governor's office said divulging the information would hamper the state in ongoing negotiations.

There seems to be no end to the news about California's self-inflicted energy mess.

Gov. Davis yesterday ordered a $90 million program to provide customers of the state's three investor-owned utilities 20 percent rebates on the electric bills if their usage is 20 percent less than it was last year. The plan would go into effect on June 1 and run through September 30. To get the rebate, customers of Pacific Gas & Electric Co., Southern California Edison Co. and San Diego Gas & Electric Co. would have to use 20 percent less electricity in each of the four months than they did in the same four months of 2000.

Davis said consumers would get the rebates at the end of the four-month period, most likely in the form of credits on utility bills. With rates still more or less frozen, if we used 20 percent less electricity we would expect our bill to be 20 percent lighter in the first place, but Davis sees this as an added incentive.

"This program puts money in the hands of California consumers, as opposed to out-of-state generators," Davis told a rapt throng at a Sacramento power plant. "The cheapest megawatt you can buy this summer is the one you don't have to purchase."

Another Davis idea, his plan for the state to purchase the transmission facilities belonging to PG&E, SoCal Edison and SDG&E, has not shown a lot of progress since the governor said on February 23 he would have the deal put together in "four weeks, at the outside." Yesterday, the governor's press secretary, Steve Maviglio explained "We are dealing with complicated issues." On March 1, Maviglio said a deal would be worked out with SDG&E "within a week." Two weeks later, utility spokesman Doug Kline said the negotiations have been going on "for the past several weeks, and they continue."

As originally envisioned, the state would pay perhaps as much as $3 billion for the transmission assets of the three utilities. Then, on February 23, the governor announced that a preliminary deal had been reached with SoCal Edison for that company's wires for $2.76 billion. PG&E has a much larger system and two weeks ago the governor's office was talking about paying $7 billion for its transmission assets. The company seems to be holding out for $10 billion, but all spokesman Ron Low would say is "Discussions are continuing."

During the endless chain of Stage 2 emergencies declared last year by the California Independent System Operators, the state's investor-owned utilities were ordered to curtail service to customers with interruptible contracts -- businesses that agree in advance to service cuts in exchange for lower rates. Cal-ISO could call on 2,700 megawatts of load shedding that way. But the contracts are not open ended and most of the power that can be saved in 2001 has already been saved.

Carl Wood, a member of the California Public Utilities Commission, is expected to propose changes to the system later this week. A spokesman said he will propose changes in who is eligible to participate, whether current participants can drop out and how much warning a customer should have before being shut off. Any changes will have to be in place by June, when the weather warms up and the air conditioners are switched on.

Calpine Corp. said yesterday it has begun supplying the California Department of Water Resources with power from a brand new Arizona power plant that has begun testing prior to the start of commercial operations, which are scheduled for May 15. Until then, the water agency will have the option of purchasing up to the full 555 megawatt output of Calpine's South Point Energy Center, located near Needles, Calif.

-- Martin Thompson (, March 15, 2001

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