Critics lambaste new energy deals;

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Worth more politically, they say

The San Francisco Chronicle

SACRAMENTO: Eight reworked energy contracts unveiled this week won’t save California consumers much money and still lock the state into needless round-the-clock power purchases, consumer advocates said yesterday.

A day after Gov. Gray Davis‘ team of lawyers and energy advisers touted new agreements they said saved money and improved some terms of the contracts, some energy experts blasted the new deals as much ado about nothing.

New contracts with Calpine Corp. and a Baltimore energy company cut the lengths of the agreements and altered some costs, but consumer advocates said the deals played better politically than economically.

“Most of the savings don’t occur for nine years. That’s not much help to ratepayers now,” said Bill Marcus, a Sacramento economist who works for The Utility Reform Network and other energy consumer groups.

Marcus noted the new deal with Baltimore’s Constellation Energy still required the state to buy some power from the company at more than $150 per megawatt hour during the next two years. A megawatt-hour costs about $30 on the state’s spot market today.

State negotiators said they had improved the deals dramatically by ensuring that new power plants would be built and increasing the flexibility of when power is used.

“We’ve significantly improved our position relative to the old contracts,” said Richard Katz, a top Davis energy adviser.

A group of state lawyers and energy officials have worked for months to renegotiate contracts Davis signed last year during the height of the energy crisis. While the Davis administration says the contracts helped stabilize out-of-control costs that ruined the state’s utilities, the deals have come under fire for their high prices and unfavorable terms to the state.

Yesterday, some consumer advocates said the state hadn’t fared much better in its new negotiations.

One reworked Calpine deal cuts the cost of power from $61 per megawatt-hour to $59.60 – only a 2 percent reduction, said Doug Heller, spokesman for the Foundation for Taxpayer and Consumer Rights. Cost savings in the Calpine deal occur largely because the contracts were shortened.

“Is it really a victory to say they’ll only be able to beat us over the head with these prices for eight years instead of 10? We’re still left with a headache,” Heller said.

But Barry Goode, Davis’ top lawyer and one of the state negotiators, said consumers would still save $3.5 billion off the total cost of the contracts.

“We didn’t get everything we wanted,” he said. “But in what negotiations do you ever get everything you want?”

Heller also blasted the negotiators for agreeing to drop its case against Calpine and Constellation at the Federal Energy Regulatory Commission. The state has asked the commission to throw out 32 energy contracts, claiming they were negotiated during a time when generators were illegally manipulating the market. Also as part of the new agreements, Attorney General Bill Lockyer agreed to drop his investigations into the two companies. He is conducting a wide-ranging inquiry into the state’s energy debacle.

Marcus also criticized the new deals for not reworking some terms he said would continue to require the state to buy power round-the-clock.

“The problem is we bought too much power at 6:30 in the morning,” he said. ‘That hasn’t changed.”

But state officials said the contracts called for the state to buy more power this year and next, and the state has the right to determine when.

“We have added a lot of flexibility,” Goode said.


E-mail Mark Martin at [email protected]

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