Governor Davis Must Renegotiate Power Contracts, PUC Must Retroactively Ban “Direct Access” to Save $4 Billion Wasted on Energy Surplus

The state of California expects to be selling surplus power at a loss for the next ten years. The state, which signed long-term contracts for power at the height of the power crisis, purchased an excess supply of electricity at prices far higher than the currently projected market price for electricity, according to a Los Angeles Times report. Additionally, as a result of a delay at the Public Utilities Commission (PUC), a number of large businesses have signed side deals with power companies to escape the bill for state-purchased power, creating an even greater surplus.

“While consumers and the state economy suffer as a result of the power crisis, energy companies are getting billions of dollars for electricity that nobody needs,” said consumer advocate Douglas Heller of The Foundation for Taxpayer and Consumer Rights. “The next decade will be one long Christmas for energy companies if the Governor and Public Utilities Commission do not step in and fix some expensive mistakes.”

According to the Times, the cumulative effect of these problems is approximately $4 billion in higher energy costs for utility customers. The high-priced surplus has two main causes, both of which consumer advocates, energy experts and some state officials have been warning the Governor and PUC about for months:

• The state has purchased far too much power, agreeing to pay exorbitant prices, through long-term contracts with electricity generators. These contracts, many of which were signed when power companies were threatening a summer of blackouts, should be renegotiated;
  

• In late September, after months of delay, the PUC banned “direct access,” the process by which industrial customers of the utilities cut side deals with power companies rather than buying state-purchased power. The Commission has the authority to make that ban retroactive to July 1, 2001, which would save consumers billions of dollars, but the PUC has failed to take this important action.

“Governor Davis must demand that power companies renegotiate their over-priced power contracts with the state,” said Heller. “The Public Utilities Commission must make retroactive its recent ruling that prohibits big businesses from escaping their share of the power crisis tab. It is totally unfair to let some big businesses off the hook, while residential and small business consumers pay even more for the deregulation crisis. It was those same big businesses that pushed for deregulation in the first place, and now they want the rest of California to pay for its failure.”