Suit Aims to Void Electrical Contracts

All of California’s long-term electricity contracts should be overturned because a key negotiator for the state had a personal conflict of interest, according to a state senator and a conservative legal foundation that filed a lawsuit Wednesday in Los Angeles County Superior Court.

Sen. Tom McClintock (R-Thousand Oaks) and the U.S. Justice Foundation allege that the state’s contracts are void because state negotiator Vikram Budhraja was on the payroll of Edison International--the parent company of Southern California Edison--at the same time he was working as an energy consultant for the state.

“His interests are harmful to the public,” states the lawsuit, which asks a judge to immediately suspend the contracts.

Last spring, the state Department of Water Resources signed dozens of deals worth $43 billion to help supply electricity to the customers of financially hobbled utilities. Eight contracts have since expired and another eight have been renegotiated.

Water Resources spokesman Oscar Hidalgo warned Wednesday that a victory by McClintock in court would “return us to the brink of blackouts.”

“No matter what you think about [the contracts],” Hidalgo said, “they keep the lights on.”

Besides, he said, Budhraja has recused himself from dealing directly with Edison. He did not help negotiate the state’s long-term power contract with Edison subsidiary Mission Energy, Hidalgo said.

But McClintock, who is running for state controller against Democrat Steve Westley, calls Budhraja’s conflict “self-evident,” given that the water department signed long-term contracts in order to supply power to Edison. Customers of Edison, PG&E; and San Diego Gas & Electric are expected to pay the full cost of the contracts.

The lawsuit alleges that Budhraja violated a statute that prohibits state employees from being financially interested in any contract made by them or by a body or board of which they are a member. Courts have ruled that contracts made in violation of that law are void.

What isn’t clear but will be learned through the lawsuit, McClintock said, is whether the $100,000 or more that Budhraja received last year from Edison amounts to 5% or more of his annual income. State law uses such a threshold to define whether an employee has a financial interest in a contract.

Once a senior vice president at Southern California Edison, Budhraja left the utility in January 2000 to create a Pasadena consulting firm called Electric Power Group. In January 2001, the state hired Budhraja’s company for $6.2 million to help it respond to the electricity crisis. As a state consultant, Budhraja was required to disclose his economic interests. Paperwork he filed in late March shows that he was paid at least $100,000 by Edison in 2001.

Both Budhraja and Edison officials said that he did no work for the money. Instead, it was an annual retainer that preserves Edison’s right to call upon his services. The retainer was renewed this year, Edison officials said.