Judge orders Davis to disclose electricity contracts state signed with energy companies

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San Jose Mercury News

SAN JOSE, Calif. _ A state judge Wednesday ordered Gov. Gray Davis to disclose the electricity contracts the state signed with energy companies amid growing concern that the deals lock in years of expensive power while prices are falling.

A Davis spokesman said he would release the contracts Friday before the court’s noon deadline. Davis agreed the deals look expensive now but said they lowered market rates and will ease future price spikes.

“The days of raping and pillaging California are over,” Davis said. “Our plan is beginning to work. We are turning the corner.”

State officials have said the average cost per megawatt-hour of the deals ranges from $138 this year to $59 in 2010. But average market prices have fallen from $200 to $400 per megawatt-hour two months ago to about $57 today.

Based on limited details released so far, consumer advocates and market analysts have stepped up criticism of the deals, arguing the state has saddled consumers with overpriced power that could now be bought cheaper.

“We’re going to wind up paying prices that look maybe twice over market for a good portion of the state’s power for I don’t know how long,” said Robert Michaels, an economist at California State University-Fullerton.

Added Doug Heller of the Foundation for Taxpayer and Consumer Rights: “From what we know so far, these contracts will lock the crisis in for 10 years.”

But Severin Borenstein, director of the University of California Energy Institute, said the deals should be judged by the market conditions when they were signed, not today’s lower prices.

The state began buying power for its two largest utilities, Pacific Gas & Electric and Southern California Edison, in mid-January as they neared bankruptcy and could no longer afford to buy for their customers. At a rate of $45 million to $100 million a day, the tab has now topped $7 billion.

The 38 signed contracts, worth $42.8 billion and ranging in length from a few months to 20 years, are intended to lower the state’s costs by locking in supplies at more competitive rates than offered on the spot market.

Davis for months refused to disclose details of the power purchases, saying it would jeopardize the state’s bargaining position and expose consumers to higher prices.

News agencies, including the Mercury News, and Republican lawmakers have sued to compel disclosure, arguing the public has a right to see how its money is being spent.

With a court date nearing this week, Davis dropped his opposition to releasing the deals, saying disclosure no longer poses a threat.

But the contracts include a confidentiality clause that gives sellers veto power over disclosure, and the state urged companies in a letter to appear in court if they had concerns about revealing the deals. Several company lawyers were in court Wednesday but made no comment.

San Diego Superior Court Judge Linda B. Quinn’s order allows the state to withhold details in the contracts about fuel costs, plant efficiency ratings, transmission-related costs and energy delivery points. She set a June 27 hearing on disclosure of those details and on release of the state’s daily power costs.

The governor asked the court to allow 14 days to prepare release of the long-term contracts. Davis press secretary Steve Maviglio said the governor wanted more time to black out sensitive information in the contracts and would not appeal.

Critics say full disclosure will reveal important pricing details. The Los Angeles Times reported Wednesday that some of the contracts ranged in price from $58 to $154 per megawatt-hour, and a few others charged about $22 per megawatt-hour plus fuel costs.

In a separate deal with Calpine Corp., the state will pay $80 million to $90 million a year for 20 years just for the right to buy 495 megawatts at $73 per megawatt-hour.

While market analysts said such “on-call” contracts are not unusual, the state and Calpine had not acknowledged those costs earlier.

Calpine spokesman Bill Highlander did not dispute the account Wednesday but said the state had suggested the deal’s structure.

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