State must bare secret energy deals

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San Diego Union Tribune

The state’s secret energy deals won’t be secret much longer.

Even as some details about California’s long-term power contracts began to emerge, a Superior Court judge yesterday ordered the almost-full release of the state’s agreements with power suppliers by noon tomorrow to attorneys representing news organizations and a dozen state lawmakers.

Judge Linda B. Quinn also set a hearing for June 27 to decide whether to order the state to release information about its costly spot-market electricity purchases, something the state only wants to do six months after the transactions are completed.

The news organizations and legislators filed suit under the Public Records Act, seeking the contracts that bind the state to more than $40 billion in power purchases over the next decade.

Revelations that California has contracted to pay as much as $154 per megawatt-hour to Constellation Energy Group Inc. quickly brought complaints that the state had overpaid for electricity. The price of the commodity is now plunging.

The Los Angeles Times and at least one other newspaper, which obtained some of the long-term state contracts, reported that power costs ranged to as low as $58, and down to about $22 when the state supplies fuel to generating plants.

By comparison, spot prices yesterday for power were from $55 to $65 per megawatt-hour, far below levels earlier this year when prices averaged more than $250 for several months and reached a high of nearly $3,900.

Until last June, prices rarely exceeded $50 per megawatt-hour. Deregulation advocates said prices would decline as the market was opened up.

Gov. Gray Davis‘ strategy in dealing with budget-busting costs over the past year has been to sign long-term deals to avoid buying in daily markets. Yesterday, he said comparing contracted electricity costs to spot prices is unfair.

”The price of spot market electricity is coming down because we have locked in long-term contracts,” Davis said. ”We knew this going in. The purpose of getting long-term contracts is to wean ourselves away from a spot market.”

The governor referred to the often-cited criticism that California’s soaring power prices were caused partly by an excessive dependence on buying power in daily markets, as opposed to under longer contracts.

Severin Borenstein, an expert in electrical deregulation from the University of California Energy Institute, agreed that comparing current spot prices with contract prices was unfair.

Speaking at a news conference yesterday hosted by the governor’s press secretary, Borenstein said the deals should be analyzed in the context of conditions that existed as they were negotiated.

Spot prices during the first three months of this year, for example, averaged about $285 per megawatt hour.

But a prominent critic of deregulation said that neither buying strategy presented an acceptable option for consumers.

”They gouge you with spot prices or they gouge with term contracts,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica, which is expected to lead a ballot initiative next year over deregulation.

”We have to get out of this deregulation disaster.”


For months, Davis refused to make public details about the contracts, saying that revealing information about the deals would put the state at a disadvantage in contract negotiations.

The state became a major electricity buyer after the near-bankrupt utility companies were unable to make purchases on their own.

This week, however, Davis agreed to release the contracts, with certain portions censored. The governor’s change of heart came as the newspaper reports emerged and critics alleged that the state was overpaying.

A spokesman for Enron Corp. said yesterday that the state had many opportunities to secure power at lower prices than it appears to have paid under the contracts. Enron, however, declined to sell any power to the state under contract.

Outside of court yesterday, Deputy Attorney General Tim Muscat said that the state has secured enough contracts in the past month to feel comfortable releasing long-term contract details.

The state has signed 61 contracts or agreements in principle that cover much of the state’s unmet electricity needs, he said.

”We have finally reached critical mass and now we think we can disclose the contracts and still protect the public’s interest in getting the best deal and going forward with negotiating agreements,” Muscat said.

But he added that the state wants to keep private some technical contract information that could harm the state’s contract partners.


”You are going to be looking at a contract that has 98 to 99 percent of the content in it,” Muscat told reporters gathered outside Quinn’s San Diego courtroom. ”The only thing that could be removed are some technical issues.”

Alonzo Wickers, an attorney representing the coalition of media organizations, said he will oppose allowing the state to omit portions of the contracts and will seek full information about spot market buys.

Wicker said that having complete access to the documents ”is essential to the public’s full understanding of the contracts.”

Wickers is representing the Copley Press, which publishes The San Diego Union-Tribune; the Los Angeles Times; the San Jose Mercury News; the San Francisco Chronicle ; Dow Jones; the McClatchy newspapers; The Orange County Register; Bloomberg; and The Associated Press.

Muscat had unsuccessfully sought 14 days to provide the documents to plaintiffs. He said the state’s business partners needed to have the opportunity to raise objections to releasing the information. The contracts contain confidentiality clauses.

Among those seeking a delay in the judge’s ruling yesterday was an attorney representing Morgan Stanley, a marketer in power transactions, who said he had just learned of the litigation this week.

”Once the contracts are publicly disclosed, the eggs cannot be unscrambled,” said attorney Eric Landau, who said his client’s competitive position could be hurt by the release of information.

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