Calif. Wants Cheaper Power Contracts

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Associated Press

SAN FRANCISCO: Gov. Gray Davis on Monday asked federal regulators to trim back the cost of long-term energy contracts the state scrambled to sign at the height of last year’s energy crisis.

With the supply crunch seemingly passed and power prices plunging, Davis is asking the Federal Energy Regulatory Commission to reduce by $21 billion the cost of 20-year contracts signed when prices were high.

Davis fumed at FERC last year for taking too long to cap prices as blackouts rolled, electric rates climbed and other states began casting for California business.

But power sellers say Davis’ latest request is a political ploy, and industry analysts say the state, which has a $10 billion power debt, might be wasting its time.

“I don’t think the state has a long shot of getting what they’re seeking here,” said Gary Ackerman, executive director of the Western Power Trading Forum, which represents many power sellers.

Davis, in Washington at a national governors meeting, denied the complaints were politically motivated.

“(FERC commissioners) need to send a signal to the energy companies to go back and renegotiate” the contracts in earnest, Davis said.

FERC has agreed with the state Public Utilities Commission that energy sellers charged unfair prices during the last-minute deals.

Since power prices fell, Davis has been roundly criticized by Republicans, consumer groups, and even his own state appointees for buying too much power at too high a cost.

The state is arguing that FERC’s inaction and sellers’ illegal market manipulation sent prices soaring, and wants FERC to discount the contracts or force sellers to renegotiate.

Even if it can prove its hand was forced, the state may not get its way because the contracts contain clauses saying the state has to pay them even if FERC finds them unreasonable, said Severin Borenstein, director of the University of California Energy Institute.

Davis has repeatedly defended the contracts, saying sellers held all the leverage at a time when some prices had risen tenfold, and sellers say the state knew what it was doing.

After much prodding, Davis has attempted to renegotiate with power sellers. A sense that talks weren’t going well prompted the Public Utilities Commission to file the complaint with FERC on Monday.

FERC spokeswoman Tamara Young said Monday the commission would review the filing and request public comment before taking any action.

“I don’t really expect FERC to do much of anything,” said Harvey Rosenfield, president of the consumer advocacy group Foundation for Taxpayer and Consumer Rights.


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