Consumers won’t soon see lower bills from reworked energy deal

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San Jose Mercury News

SACRAMENTO: The recent reworking of some of California’s long-term energy contracts has shaved nearly $5 billion from the more than 50 deals, but consumers won’t immediately see the savings on their own energy bills.

California officials announced the latest restructured contract Monday, as Tulsa-based Williams Cos. agreed to changes that could save the state between $375 million and $1.4 billion on a $4.3 billion energy contract. California has now negotiated 13 of the 56 long-term contracts, originally worth about $43 billion, that critics said locked the state into high prices for decades.

The agreement frees Williams from lawsuits filed against it by the state and from California’s attempt through the Federal Energy Regulatory Commission to recover about $500 million the state alleges Williams overcharged it during the energy crisis.

Consumer advocates said Tuesday the reworked contracts and refunds won’t cause consumer rates to drop anytime soon and amounted to a ”missed opportunity.”

Nettie Hoge, executive director of The Utility Reform Network, said the reworked deal would have ”some modicum of benefit down the line. We’re not going to see any rate reduction soon.”

Because the contracts are worth less means the state has less money ”to collect from ratepayers” and will repay its debt faster, said Oscar Hidalgo, spokesman for the Department of Water Resources, the agency purchasing energy until the end of this year. In January, utilities are expected to again be able to buy electricity.

Ratepayers are still going to pay higher rates to pay the debts incurred by utilities in 2000 and 2001, when wholesale prices spiked.

Most of the energy in the Williams contract is scheduled through San Diego Gas & Electric Co., Hoge said, and customers there would be the first to see any savings.

”But how it’s allocated, and among which customer classes, I don’t think anyone could say,” she said. ”We’re not going to see our rates go down until PG&E and Southern California Edison are fully bailed out.”

The three utilities’ debts jumped when they couldn’t pass the higher prices on to consumers, whose rates were capped.

In January 2001, the state started buying electricity, eventually paying $6 billion for energy that is now being repaid through the sale of revenue bonds. The spot market prices were the basis for California’s refund request with FERC that originally sought $9 billion from energy wholesalers for sales from October 2000 to May 2001.

The state Public Utilities Commission raised consumer rates last year to help pay for the utilities’ and the state’s energy debts.

The reworked contract won’t cause rates to decrease by a set amount, said Bill Kissinger, Gov. Gray Davis‘ deputy legal affairs secretary, but could lessen the amount of time people will pay the higher electricity rates.

The deal also ”provides benefits that are hard to translate into dollars,” Kissinger said, including having Williams pay about $80 million to help outfit schools with solar panels.

”We’re trying to make California more efficient, less reliant on gas-powered generation,” he said. ”We’ve tried to be creative here, using the money in ways that are inventive to benefit the state.”

Consumer advocate Harvey Rosenfield, executive director of the Foundation for Taxpayer and Consumers Rights, applauded the state’s efforts to retrofit schools.

But the money, he said, shouldn’t be spent as if part of the state budget but be returned to ratepayers.

Williams’ cooperation with the state could encourage other energy companies to renegotiate contracts, said PUC general counsel Gary Cohen.

The deal could ”be the catalyst that we need to get more settlements happening,” he said. ”It might provide some incentive for other energy sellers who are now subject to more and more investigations.”

The deal reached between the state and Williams doesn’t affect a federal grand jury’s investigation into allegations that several power companies schemed to drive up electricity prices in California in 2000 and 2001.

On Tuesday, two more energy companies confirmed they had received subpoenas from federal prosecutors investigating the California energy crisis.

Houston-based Dynegy Inc. and Southern Company each received a subpoena to provide information to a federal grand jury in San Francisco.

Southern’s former subsidiary, Mirant Corp., marketed and traded energy in California during the state’s power crisis. The subpoena covers a number of broad areas, including specific information regarding electricity production and sales activities in California, Southern officials said. Mirant, based in Atlanta, was spun off from Southern Company in April 2001.

Mirant, Williams, Houston-based Reliant Resources Inc. and Charlotte, N.C.-based Duke Energy were also subpoenaed and each said they would cooperate.

Last month Timothy Belden, a former Portland, Ore.-based Enron Corp. trader pleaded guilty to wire fraud for scheming to drive up California energy prices.

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