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State Officials Lower Estimate on Power Purchases

(AP) 11.06.01, 6:45p --

California power traders Tuesday lowered by $2 billion the price they estimate the state will have to pay for power through next year.

California Department of Water Resources officials said in a Public Utilities Commission filing Monday that it will cost $18 billion to buy power for customers of three utilities through next December. In August, DWR forecast that cost could reach $21.45 billion.

The reduction is partly due to a number of commercial customers fleeing the utilities while the PUC delayed a vote to stop letting customers choose alternate providers.

The PUC announced June 15 a plan to suspend direct access, which lets customers bypass a utility and contract directly with energy providers. But commissioners didn't stop direct access until Sept. 20.

During the three-month period, customers representing about 13 percent of the power needs of Southern California Edison, Pacific Gas and Electric Co., and San Diego Gas & Electric defected. While that reduces the amount of power DWR has to purchase, it also lessens the base of customers who will repay the energy costs incurred earlier this year when wholesale prices soared above a retail price cap.

The department said it also expects higher financing costs because of a delay in issuing about $12.5 billion in bonds to pay for DWR's energy purchases and repay the state general fund for money already spent on energy.

The bond sale needed PUC approval of Davis administration plan that would have set how DWR would be paid by consumers. With no alternate plan approved, the bond sale has been delayed indefinitely and a short-term loan the state took out to cover some purchases has been converted to a higher-interest loan.

"This forecast assumes that there will be a rate agreement approved by the end of the year," said DWR spokesman Oscar Hidalgo. "If it's delayed beyond that, we're looking at another calculation."

Some of the higher financing costs were offset by lower projected natural gas prices and lower spot market energy prices, Hidalgo said. The lower prices have been helped by some increased electricity supplies from new power plants, while consumer conservation has lessened demand, Hidalgo said.

The California Energy Commission said Tuesday that residents cut their power consumption by almost 9 percent in October compared to last year's use. State officials credited several programs that encouraged conservation, including utility- and state-sponsored rebates on power bills and energy efficient appliances.

During peak times, energy use dropped by 8.8 percent, while overall use dropped by about 2 percent. Gov. Gray Davis called the conservation effort "heroic" and credited consumers with helping to bring down power prices and stave off blackouts.

-- PHO (, November 07, 2001

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