Water District Hits Contract Snag With Electricity Provider
When the state Legislature passed a bill that deregulated California’s lucrative energy industry, Donald Kendall, general manager of Calleguas Municipal Water District, started seeing dollar signs.
Competition among electricity providers, he logically thought, would lower energy prices, which in turn would translate into savings for the district’s more than 500,000 county water customers.
However, after the district signed a contract with Los Angeles-based New Energy Ventures to receive power at a discount, the provider apparently backed out of the deal last week, saying that the district must meet new criteria before qualifying for any savings.
And that has Kendall angry.
“We’re incredulous about this,” he said. “We had a deal and they reneged. . . . They’ve acted in bad faith, and that is totally unacceptable as far as I’m concerned.”
According to Kendall, Calleguas agreed to the contract in December after New Energy Ventures guaranteed a 5% savings over such other competitors as Southern California Edison, Calleguas’ longtime electricity provider.
The district estimated the move would have saved about $25,000 a year, which would have resulted in modestly reduced prices for customers.
Another reason Kendall felt safe with New Energy Ventures was the company’s affiliation with the Assn. of California Water Agencies, a group of municipal water suppliers from around the state.
The new service was supposed to go into effect Jan. 1 but was postponed by New Energy until March due to problems in getting the equipment ready to switch electric service.
Last week, however, after the water agencies association board voted to amend the criteria used by New Ventures to determine who qualified for specific savings plans, the company backed out of the deal, saying the district must now meet a new set of standards regarding the minimum number of kilowatt hours needed to be eligible for the 5% savings plan.
“What they’re really saying is, ‘We’re not going to honor our agreement,’ ” Kendall said. “We already met their standards, and now they’ve gone back on everything they’ve said.”
Lew Phelps, a spokesman for New Energy, said that although he understands Kendall’s position, the company negotiated with the district in good faith and did not know the criteria would be changed.
“The revision came about due to some late-breaking changes in the economy,” Phelps said. “But we don’t think everything’s lost. . . . We still have a number of other plans that we will present to Calleguas and other agencies once we’re through analyzing the numbers.”
Officials at the water agencies association declined to comment on the changes.
Established in 1995 by former Southern California Edison President Michael Peevey, New Energy has already entered into agreements with a number of other companies, including Robinsons-May, to provide electricity to their stores in Orange and San Diego counties.
Kendall said that Calleguas isn’t the only water agency that agreed to sign on as a New Energy client and is now being left in the lurch.
Las Virgenes Municipal Water District officials, he said, have also expressed anger at New Energy after opting for the same savings plan only to be told the district didn’t qualify.
Camrosa Water District, which supplies the Santa Rosa Valley and uses a portion of Calleguas’ water supply, had a similar experience.
In lieu of the new standards and what he feels are unethical business practices, Kendall has decided to sever the district’s relationship with New Energy and continue with Southern California Edison.
“People talk about deregulation and we’ll all be better off,” Kendall said. “I heard the same arguments for the airline industry and for cable, but it hasn’t gotten any better and I doubt it will for power.”
