State’s Electricity Contracts Are Under Assault on 2 Fronts

The state Public Utilities Commission is challenging several of the state’s long-term contracts with electricity generators because the prices and terms may not be good for consumers, commission President Loretta Lynch said Monday.

Also on Monday, two consumer groups called for a state investigation of potential conflict-of-interest violations that the groups said should void some contracts.

The separate actions are aimed at reversing commitments California made at the height of the electricity crisis. The state, through the Department of Water Resources, agreed to buy electricity at prices that appear expensive now that market prices for power have plummeted.

“At some point those prices are out of whack, and those prices are not good for consumers,” Lynch said at a San Francisco news conference.

The panel has asked the Federal Energy Regulatory Commission to review several of the contracts that the state negotiated since January to buy electricity for customers of the state’s three investor-owned utilities. All told, the contracts are worth $43 billion over the next two decades.

Because the regulatory commission controls wholesale electricity prices, the agency has jurisdiction to review the electricity contracts to determine whether the prices are just and reasonable, Lynch said. The state utility regulators are hoping that their federal counterparts, bolstered by two new commissioners with state regulatory experience, will be sympathetic to California’s plight and force renegotiation of the contracts, she added.

“I’m hoping the new [regulatory commission] looks with new eyes about what happened when the sellers had us over a barrel last spring, and what came out of that,” Lynch said.

Many of the contracts range from seven to 10 years at prices of 7 cents to 12 cents a kilowatt-hour, she said. In January, when the state began negotiating the contracts, the market price was often more than 30 cents per kilowatt-hour. But lately, the market price has been closer to 3 cents.

‘Monday morning quarterbacking’

Lynch is an appointee of Gov. Gray Davis but has lately defied his wishes on several aspects of the energy crisis. Her advocacy of federal review of the contracts met with a chilly reception from the Davis administration.

“From the governor’s perspective it’s just more Monday morning quarterbacking,” said Davis spokesman Steve Maviglio. “The governor believes the contracts were crucial in getting us into an advantageous position this summer and preventing disruption and stabilizing prices.”

Monday’s other attack on the contracts came from Consumers Union and the Utility Reform Network, which took aim at potential conflict-of-interest violations by Vikram Budhraja, president of Pasadena-based Electric Power Group.

Budhraja’s company helped negotiate a contract for the state to buy electricity from Williams Cos. in February. In August, Budhraja amended his statement of economic interest to reveal that his company had earned more than $10,000 in consulting fees from Williams in 2000.

In a letter to state Atty. Gen. Bill Lockyer, the groups asked for an investigation. “It’s clear the attorney general needs to look at whether there’s been a violation, just to protect the government of California and the taxpayers and ratepayers,” said Harry Snyder of Consumers Union. “And the governor needs to reach out and force a serious renegotiation of these contracts because they’re unconscionable.”

Under state law, a contract that violates the state’s conflict-of-interest regulations is void.

Lockyer spokeswoman Sandra Michioku said a wide-ranging investigation of potential conflict-of-interest violations involving power contracts is already underway, begun at the behest of Secretary of State Bill Jones, a Republican candidate for governor.

Budhraja’s attorney, Stephen Kaufman of Los Angeles, said there is a legal question about whether Budhraja was required to disclose his 2000 dealings with Williams. In any case, his client did no work for the company in 2001, he said.

State law generally prohibits state employees and consultants from participating in government decisions involving companies from which they have received income in the last year.