Calif. Gov. Seeks to Overturn Power Deals
Sunday February 24 5:37 PM ET
dailynews.yahoo.com
By Deena Beasley
LOS ANGELES (Reuters) - California announced on Sunday plans to petition federal electricity regulators to void more than 30 long-term, and now high-priced, power contracts the state signed last year.
The move will ``give FERC (the Federal Energy Regulatory Commission (news - web sites)) an opportunity to see if it can ensure a fair market,'' a spokesman for California Governor Gray Davis, who is in Washington D.C. for a conference of governors, said during a conference call.
The California Public Utilities Commission (news - web sites) said it filed petitions under a section of the Federal Power Act charging that contracts the state has with 22 sellers are at prices and terms that are ``unjust and unreasonable,'' said Gary Cohen, general counsel for the agency.
He estimated that, with the contracts valued at some $43 billion, the state committed to overpayments of about $21 billion for 32 of the long-term power deals.
Calpine Corp. (CPN.N), a power producer based in San Jose, California, said in a statement that it has anticipated this filing for some time and is confident that the FERC will find the company's long-term contracts with the state are just and reasonable.
``Our contracts are the state's lowest priced agreements and helped drive down energy prices in California during an extremely volatile period,'' James Macias, Calpine's senior vice president and lead negotiator for the contracts, said.
The PUC is asking FERC to void 32 problematic contracts so that ``we can be back in the position we would be in if FERC had acted in the winter of 2000'' to ensure market stability, he explained.
``In January of 2001, power generators threatened to stop delivering power to Californians. The lights were going to go off ... FERC was no where to be found,'' said Barry Goode, California's Legal Affairs Secretary. ``FERC allowed an absolutely insane market to occur.''
He said the state got the best contracts it could at the time, but the terms would have been much more favorable if FERC had been doing its job.
The contracts were designed to rescue California from having to pay spot-market prices of $300 per megawatt-hour or more. Now, the average price of the contracts -- $88 per megawatt-hour -- is roughly three times more expensive than the spot market.
Goode also alluded to evidence of market manipulation as a factor in the decision to petition FERC to review the contracts.
Earlier this month, FERC Chairman Patrick Wood told a congressional committee that his agency would investigate whether bankrupt energy trader Enron Corp. (ENRNQ.PK) and other companies manipulated California's power market and inappropriately influenced the prices of long-term power contracts.
``We are not alleging that the contracts were improper or imprudent, nor are we accusing every seller of improper behavior,'' said Erik Saltmarsh, chief counsel of California's Electricity Oversight Board. ``The market was so distorted it wasn't possible to get a deal on terms that could be obtained in a functioning market,''
California has for several months been trying to renegotiate the long-term contracts with the sellers, but a lack of progress led to the decision to petition FERC, the officials said.
The contracts also have become an issue in the state's governor's race, where the three main Republicans -- former Los Angeles Mayor Richard Riordan, Secretary of State Bill Jones and financier Bill Simon Jr. -- have criticized Davis' handling of the state's energy crisis. |
