Many Power Deals Announced By Calif Gov Still Not Final
By Jason Leopold
  
03/07/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 


OF DOW JONES NEWSWIRES 

   
(This article was originally published Tuesday.)

LOS ANGELES (Dow Jones)--Many of the long-term power supply contracts 
announced by California Gov. Gray Davis this week remain under negotiation or 
are the subject of ongoing lawsuits, power suppliers said Tuesday. 


The lack of finality to the deals raises questions about the state's success 
in covering its power needs, particularly going into what is expected to be 
an unusually tight summer. 


Generators said privately they were surprised the governor went ahead with 
his announcement Monday, given that many of the contracts haven't been signed.


David Freeman, general manager of the Los Angeles Department of Water and 
Power, who negotiated the contracts on behalf of the state, conceded that 
details remain to be worked out. 


"This is not a done deal," Freeman said, adding that credit concerns are 
keeping generators from signing the deals. 


Davis announced Monday that California has secured 40 long-term contracts 
that will provide California with about 629 million megawatt-hours of 
electricity over 10 years, at a price of more than $40 billion. 


Several of those forward deals, however, involve contracts originally held by 
Edison International (EIX) unit Southern California Edison and PG&E Corp. 
(PCG) unit Pacific Gas & Electric at the California Power Exchange, 
previously the state's main power market. 


The governor seized those contracts earlier this year, just before the Power 
Exchange liquidated them to cover hundreds of millions of dollars in power 
bills the utilities had failed to pay. 


The contracts, which total about 1.3 million megawatt-hours of electricity 
and have a market value of about $1 billion, according to market sources, 
have yet to be paid for or signed over to the state. Duke Energy (DUK), one 
of the suppliers that sold the contracts to Pacific Gas & Electric and 
Southern California Edison, has sued Davis for unlawfully commandeering those 
contracts. 


Although Duke has reached an interim settlement to continue providing power 
to the state Department of Water Resources until April 30, the company and 
the Davis administration still have to "develop a comprehensive long-term 
settlement to pay for the power supply contracts," said Duke spokesman Tom 
Williams. 


The governor went ahead with the announcement, because the California 
Department of Water Resources believes it will be able to finalize and sign 
the contracts over the next several weeks, Davis spokesman Steve Maviglio 
said. 


Separately, several suppliers named in the governor's announcement Monday - 
including Duke, Reliant Energy Inc. (REI), Mirant Corp. (MIR), Sempra Energy 
(SRE), Enron Corp. (ENE) and Avista Corp. (AVA) - said they have yet to sign 
final agreements with the state, although negotiations were ongoing. 


"We are working in good faith with the DWR toward a long-term contract," said 
Art Larson, spokesman for Sempra Energy Resources, a unit of Sempra Energy 
(SRE). Larson said Sempra signed a terms of agreement with the DWR and 
expects to reach a final agreement over the next several weeks. 


Reliant Energy said it has only signed a short-term contract with the state 
that expires in about two weeks. The company will only sign a long-term 
contract once it's paid more than $400 million owed by Pacific Gas & Electric 
and Southern California Edison, spokesman Richard Wheatley said. 


Mirant Corp. said it also won't sign contracts with the state until it's 
paid. 


Enron said it's reached agreement on terms with the state, but has some 
credit-related details to hammer out. 


"Everything's been agreed to except for some credit technicalities," Enron 
spokesman Mark Palmer said. 


-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com



 

  
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