Power groups in plea over contracts
Financial Times; Feb 25, 2002
By JULIE EARLE
California energy officials will today appeal to their federal counterparts to void the state's Dollars 43bn of power contracts negotiated with companies including Calpine, Williams, Duke and Reliant Energy, because they are "overpriced".
The appeal to the Federal Energy Regulatory Commission (Ferc) over contracts, signed when California power prices soared to record highs, has the support of Gray Davis, Governor of California, his spokesman said yesterday. Mr Davis has previously said the deals were necessary to try to control soaring power prices.
California negotiated power deals in January 2001, after steep power prices left the state's two largest utilities, PG&E Corp and Edison International, bankrupt.
Power prices have since fallen, and the state's energy officials claim the contracts have average prices of about Dollars 88 per megawatt hour, or about three times more than the current spot market.
PUC and the state's Electricity Oversight Board are due to make the filings with Ferc today. Ferc will be able to reject the contracts and may determine new terms.
Calpine, the California-based power company, said at the weekend however that it was confident Ferc would uphold the contracts.
Calpine is the state's largest energy supplier, and has two 10-year fixed price contracts with the state.
California officials have long accused Calpine, Enron and other power companies of "price gouging" and manipulating prices, and Ferc's chairman, Pat Wood, this month promised to investigate those allegations.
Meanwhile, Calpine, whose shares have been hit hard by concern over a delay in completing a Dollars 1bn credit line, said late on Friday that the deal was progressing and would close as soon as possible.
The one year credit line would allow Calpine to borrow up to Dollars 350m and provide Dollars 1bn in guaranteed backing from banks.
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