Copley News Service
When Gov. Gray Davis announced a record $43 billion portfolio of power contracts this week, he hailed the effort of a two-man team that led negotiations for the state as a key to resolving the state’s power crisis.
But Davis did not disclose that one of the men he praised is a paid consultant to the parent company of Southern California Edison, which is seeking billions from California to stave off bankruptcy and won several of the state contracts itself.
For his part, the Edison International consultant, Vikram Budhraja, said he was aware of possible conflicts in his role as negotiator and made efforts to avoid them.
”Anytime there was a discussion of Edison business I would leave the room and not be a party,” said Budhraja, who spent years at Edison, where he rose to senior vice president before leaving to become a consultant.
But Budhraja’s assertions failed to assuage concerns of consumer advocates regarding his role and what they say is a troubling trend of heavy involvement by Edison and Wall Street investment firms in shaping the state’s effort to resolve the debacle of electrical deregulation.
”This goes beyond bad judgment,” said Harry Snyder, senior advocate for Consumers Union in San Francisco.
”I think it is immoral and unethical to have someone who is a consultant to the energy industry bargain on behalf of the people of California. There is no way you cannot affect the price Edison will receive for their power (and other assets).”
Snyder said that even if Budhraja recused himself from direct dealing with Edison‘s business, as a chief state negotiator he was privy to knowledge that could be of enormous help to the utility in wresting the best deal from the state.
The massive portfolio of power contracts announced by the governor Monday is a keystone of his effort to stabilize power prices. The long-term contracts were a strategy favored by many in the energy industry.
But the strategy of locking in prices for up to 10 years drew criticism from consumer advocates and others as running an excessive risk of saddling the state with high prices in years to come, if currently high electricity prices decline.
Although the governor said the agreements will average about 6.9 cents per kilowatt hour over the course of a decade, the contracts remain secret another sore point for consumers and some news organization that have pressed for details.
Fredric Woocher, a Santa Monica attorney specializing in ethics issues and political law, noted that the earlier selection of Michael Peevey former president of Edison as an unpaid energy adviser to the governor was accompanied by assertions that Peevey had sold his stock holdings in the energy industry.
However, Peevey continues to serve on the board of directors of Excelergy Corp., a Massachusetts company that provides products to energy companies.
”It’s one thing to get people with previous experience, but to get someone with an ongoing relationship is more disturbing,” said Woocher, who represents The Utility Reform Network, a Bay Area consumer group, in litigation.
”Budhraja’s role is something that merits investigation by the Fair Political Practices Commission,” he added, referring to a state watchdog agency that monitors compliance with conflict-of-interest regulations, along with other oversight roles.
A spokesman for Davis said his staff was aware of Budhraja’s link to Edison prior to selection.
And Steve Maviglio, the spokesman, denied that the negotiator’s role involved conflicts, or that he was a questionable choice.
”We tried to find the best people we could to negotiate deals for the state within 30 days at prices significantly below what people said we would ever get,” Maviglio said.
He added that the state’s other lead negotiator, S. David Freeman, general manager of the Los Angeles Department of Water and Power, recused himself from negotiations when they related to his department.
Maviglio also said that Budhraja played no role in negotiating the state’s agreement to buy Edison power lines.
”That was negotiated by Michael Kahn (head of the Electricity Oversight Board) and Peevey,” Maviglio said. ”What Budhraja did had nothing to do with Edison.”
Douglas Heller, of the Foundation for Taxpayer and Consumer Rights in Santa Monica, said Budhraja’s contention that he recused himself from involvement with Edison matters failed to address a central issue.
”It is flat-out inappropriate to use a current Edison consultant as your co-leader in these negotiations,” Heller said. ”The people of California need to have faith that Davis is getting independent advice. We can’t and should not have that confidence if he turns to people with close ties to Edison for that advice.”
Heller also said that Davis appears to be relying excessively on advice from the utility companies, Wall Street investment firms and former Treasury Secretary Robert Rubin, while he has limited his contact with consumer groups.
Budhraja, who continues to negotiate contracts on behalf of the state, said he worked for Edison for more than 20 years. He said he played no role in Edison‘s tentative agreement to sell its power grid to the state, although he once headed the power grid business for the company.
While he draws a retaining fee from Edison, Budhraja said the most recent work he did for Edison was to testify as an expert witness last year in a lawsuit that he said involved power outages in 1996. He also is being paid by the state for his services.
Michael Shames, executive director of the Utility Consumers’ Action Network, said he has much professional respect for Budhraja.
”He is pretty upstanding guy,” said Shames, who opposed the strategy of seeking long-term power deals. But putting an Edison consultant on the state’s negotiating team ”looks bad,” Shames said.
What’s more, he added, ”There was no expert consultant that consumers groups use who was tapped to plug into this effort.”