Legislators and Lockyer Collide on Energy Funds

Lawmakers, searching for any viable source of revenue to help with the state’s budget shortfall, are now eyeing hundreds of millions of dollars pledged by energy companies in settlements with the state.

The state attorney general has warned lawmakers against intruding, saying his settlements with the companies dictate how the money will be used. Millions of dollars are dedicated to installing solar panels on public schools, for example.

But lawmakers struggling to close a budget gap estimated at more than $26 billion over the next 16 months are second-guessing the disbursement of the settlement money.

At stake is at least $345 million that three energy companies agreed to pay the state to settle charges of wrongdoing during the energy crisis of 2000 and 2001. Talks with other companies are underway, so more settlement money may be coming.

Last month, the Assembly Budget Committee chairwoman, Jenny Oropeza (D-Long Beach), asked the Department of Finance to freeze a $2.25-million payment to the state Energy Commission. The money had been earmarked to buy solar panels for public schools, under a settlement struck last April with Calpine of San Jose and Constellation Power Source Inc. of Maryland.

Oropeza asked for the opportunity to “evaluate, and potentially provide statutory direction regarding, the expenditure of cash settlements provided to the state as a result of this and future electricity contract negotiations in general.”

In an interview, Oropeza said she was not trying to undercut the attorney general’s settlement. But she did want to review the Energy Commission’s use of the money.

“It’s a lot of money,” Oropeza said, “and I am not willing to go ahead and just spend the money without any legislative oversight.”

The Department of Finance has yet to respond to her request to halt the flow of settlement money. But the attorney general’s office weighed in.

In a Jan. 22 letter to the Department of Finance, Chief Deputy Atty. Gen. Peter Siggins said: “While we fully appreciate the difficult financial circumstances facing our state, and we understand the legislative desire to maximize its discretion over the allocation of funds coming under state control, the effort to exert legislative dominion over these particular settlement funds is not appropriate in this case.”

The $2.25-million payment to the Energy Commission, he wrote, “should proceed, as it is an administrative necessity.”

“We believe it’s well within our authority, but also our duty to the people of California,” said Tom Dresslar, spokesman for Atty. Gen. Bill Lockyer. “We believe that the settlements will help protect our schools and communities from future price gouging and blackouts.”

The Energy Commission this week drafted a letter notifying several schools that the funds they hoped to tap for solar panels are in question.

Energy Commission spokeswoman Claudia Chandler said it costs about $20,000 to retrofit a school with power-generating photovoltaic cells. The energy settlement money would help schools cover nearly the entire expense, Chandler said.

The $8.5-million settlement Lockyer reached with Calpine and Constellation dedicates $2.75 million to retrofitting public buildings with solar devices. The rest of the money repays the state for investigation costs.

Lockyer struck a bigger settlement in November with Williams Cos., which owns the output of several large Southern California power plants. The $417-million deal resolves two state lawsuits accusing the company of illegally pricing and double-selling electricity.

It gives $3.5 million each to Oakland, Santa Clara County and Contra Costa County for “alternative energy production or improved energy efficiency.”

It also gives a total of $4.8 million to several water districts for cutting pollution and nearly $16 million to the state public power authority for installing six power-generating turbines valued at $90 million, an amount the settlement also covers. And it earmarks more than $43 million for retrofitting schools and other public buildings with solar panels and energy-saving devices.

The settlements are separate from the state’s long-term power contracts with Calpine, Constellation and Williams. Those contracts were signed in the spring of 2001 and amended months later to reduce California’s costs, after wholesale electricity prices plummeted across the West.