- The Washington Times - Monday, February 25, 2002

LOS ANGELES (AP) California will petition the federal government to modify dozens of long-term electricity contracts signed during the peak of the power crisis, a spokesman for Gov. Gray Davis said yesterday.
The Public Utilities Commission and the Electricity Oversight Board will ask the Federal Energy Regulatory Commission (FERC) today to declare the state's power contracts worth $43 billion overpriced, Davis spokesman Steve Maviglio said.
The appeal to FERC, which oversees wholesale electricity sales, could give the state leverage in its efforts to renegotiate the contracts with power companies.
Officials from the companies participating in the renegotiation talks said they believe the state's appeal will be denied.
"We're very confident on the merits that these contracts will be upheld," Joe Ronan, vice president of government and regulatory affairs for Calpine Corp., a San Jose-based power company, told the Los Angeles Times. Calpine has committed to sell more electricity to California than any other company under the contracts.
The state began negotiating power deals in January 2001 after a halfway deregulation plan, which kept caps on retail power prices while letting wholesale rates rise, left some utilities unable to buy electricity for their customers.
Then, in June, market prices fell, making the long-term contracts expensive in comparison. The contracts were designed to escape spot-market prices of $300 per megawatt hour or more. The contracts had average prices of about $88 per megawatt hour, roughly three times more expensive than current spot-market prices.
"We're not abandoning the contracts at all … but there's no reason not to make them better," Mr. Maviglio said.
The contracts will ultimately be paid for by customers of Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric Co.
State officials hope their plea to the federal agency may be better received considering the December bankruptcy of the Houston-based energy giant, Enron Corp. The company had aggressively lobbied FERC, Congress and other agencies to promote the halfway deregulation plan, which had the potential to be a windfall for wholesale energy sellers such as Enron.


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