Folks:  Please see highlighted sections.  Anyone seen Byron's plan?  Know 
where it's headed, etc.?

Best,
Jeff
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Power purchase bills exceed $7.5 billion 
Published Tuesday, July 10, 2001, in the San Jose Mercury News 
BY MARK GLADSTONE, NOAM LEVEY AND DION NISSENBAUM 

Mercury News Sacramento Bureau 


SACRAMENTO -- Six months after jumping into the electricity business, the 
Davis administration on Monday provided the first detailed glimpse of 
California's daily power purchases, showing more than $5 billion in payments, 
much of it to government-owned utilities and private companies that state 
officials have branded as price gougers. 
The state spent an additional $2.5 billion on a variety of contracts and 
other electricity services designed to stabilize the volatile energy markets, 
according to documents that the state agreed to release last week amid a 
legal dispute over public access to the data. 
In roughly the first five months of the year, the state shelled out $1.2 
billion to Atlanta-based Mirant, the most any company was paid for 
electricity, followed by $1 billion to Powerex, the marketing arm of BC Hydro 
in British Columbia. It also paid $331 million to the Los Angeles Department 
of Water and Power. 
The documents raise questions about some of the common assumptions that have 
arisen around the electricity crisis. For instance, almost 40 percent of the 
state's purchases have come from government-run power generators in 
California and elsewhere, but not Texas; some of the biggest suppliers are 
from the Northwest. 
Gov. Gray Davis, who has ambitions to run for the White House, has put much 
of the blame for the soaring costs of power on energy companies based in 
President Bush's home state. 
The figures are tucked inside 1,770 of pages of invoices that Davis has 
resisted divulging, saying disclosure would encourage suppliers to charge 
more. The state, which last month released information on its long-term 
electricity contracts worth $43 billion, agreed Thursday to release the first 
quarter details. 
Short on explanation 
The figures were disclosed late Monday by the California Department of Water 
Resources, which buys power for the state's financially strapped major 
utilities, and seem to buttress the administration's contention that the 
price of power is gradually dropping but offer little or no explanation for 
what prompted the decrease. 
In January, for instance, the average price for power on the spot market was 
$321 a megawatt hour. It peaked in April at $332 and dropped to $271 in May. 
One megawatt powers about 750 homes. 
Davis spokesman Steve Maviglio said the price data supports the governor's 
assertions that California has been gouged. ``The bad guys are clearly the 
out-of-state generators,'' Maviglio said. ``There has been a significant 
shift of money out of California.'' 
But the documents fail to shed much light on whether, as the administration 
contends, the price drop was due to long-term power contracts negotiated by 
the state earlier this year. Critics contend that the Davis administration 
panicked and rushed into deals that commit the state to pay high prices for 
many years. 
Used for support 
Republican officials used the price information to bolster their attacks 
against Davis, a Democrat, for signing long-term contracts with power 
generators even as the price of power on the spot market was coming down, 
partly because of the declining price of natural gas used to fuel many 
plants. 
``It's more clear than ever that the long-term contracts are a bad deal,'' 
said Assemblyman Tony Strickland, R-Camarillo. ``The governor's really hurt 
the ratepayers for the next five or 10 years.'' 
The newly released bills highlight the volatility of California's energy 
market, where the price per megawatt hour ranged from $70 to $1,000. On any 
given day, the records show, the prices from seller to seller varied widely, 
with some of the highest prices being charged by public utilities and 
companies outside Texas. 
On one day in February, for example, San Diego-based Sempra Energy was 
charging $165 per megawatt hour, the Eugene Water and Electric Board was 
charging nearly $500 and Duke Energy, a North Carolina company, was charging 
up to $575. 
The state's daily spending peaked May 10 at $102.4 million for all power, 
including the spot market and contracted power. 
The state began buying power in mid-January on behalf of the state's major 
utilities, which were unable to borrow money to buy power after amassing 
enormous debts for electricity. 
San Jose-based Calpine Corp., which is building several new power plants 
around California including one in South San Jose, did only $29 million worth 
of business with the state in the first five months of the year, according to 
the figures. 
The state began buying power in mid-January when Pacific Gas & Electric Co. 
and Southern California Edison Co. were on the ropes financially. PG&E later 
went into bankruptcy. 
On Monday, state lawmakers took another shot at trying to cobble together a 
plan to rescue financially ailing Edison. 
While most concede that a rescue plan Davis worked out with Edison will not 
win the necessary support in the Legislature, lawmakers have created several 
working groups to come up with alternatives. 
Compromise plan 
On Monday, state Sen. Byron Sher, D-Redwood City, unveiled the latest 
compromise proposal that seeks to protect average ratepayers and small 
businesses from further rate increases and forces everyone else to help 
finance the Edison bailout. 
The ``shared pain'' proposal would force power producers, owed about $1 
billion, to take a 30 percent ``haircut'' and agree to forgive about $300 
million in Edison debts. Edison would be asked to swallow $1.2 billion -- 
about a third of its debt. And big users would be asked to pay off the 
remaining $2 billion in debts, possibly by paying higher prices for power. 
In exchange, large companies would be given the opportunity to buy power on 
the open market, a system that would allow many of them to sign cheap energy 
deals. 
Sher presented the proposal to Senate Democrats Monday afternoon, but it 
remains unclear how much support the framework will receive in the 
Legislature. 


Contact Mark Gladstone at mgladstone@sjmercury.com or (916) 325-4314.