Bill to Rework $13 Billion in DWR Deals Stalled

A bill giving the Department of Water Resources explicit authority to rework the four remaining unaltered long-term contracts and flexibility to manage its other deals was stalled by concerns that the agency might extend some agreements. Slicing the cost of a high-priced power deal but extending its length would likely not produce considerable savings to ratepayers given today?s lower power costs. And it would keep the department in the power contract business longer than some lawmakers consider desirable. DWR?s contracting authority expired early this year. ?We want to get DWR out of the power contracting business, and all contracts should be assigned as soon as possible,? Senator Byron Sher (D-Stanford) said during a June 8 hearing of the Senate Energy, Utilities and Communications Committee. A couple of Sher?s Republican colleagues agreed, as did Southern California Edison. Thus, a vote on AB 2767 was postponed for two weeks. DWR renegotiated 33 long-term contracts it signed at the height of the energy crisis, cutting $6.3 billion off the $42 billion price tag. Its power-buying authority sunset at the beginning of the year, and it is concerned about challenges to its negotiating and long-term management authority under its statutory mandate to ?administer? the deals. The bill, authored by Assemblymember Keith Richman (R-Northridge), would increase the department?s bargaining power by heading off claims that DWR does not have the authority to rework deal terms?from price to dispatchability. DWR has attempted, without success, to rework the $6.6 billion deal with Sempra Energy Resources, the $3 billion contract with Dynegy Power Marketing, Coral Power?s $2.3 billion agreement, and PacifiCorp?s $909 million contract. DWR also continues to manage contracts with other counterparties, some of which last until 2012. It wants to be able to amend deals?be it at the request of the contracting party or of the agency?to boost reliability and lower costs, said Oscar Hidalgo, DWR spokesperson. ?The whole dynamics of managing long-term contracts can and does change, and we don?t want to lose an opportunity because of a possible technicality,? he added. The energy committee did pass two other bills this week. A measure that would prohibit investor-owned utilities that have filed for bankruptcy protection from paying excess bonuses to its executives passed on a 5-2 vote. AB 2303 by Assemblymember Mark Leno (D-San Francisco), however, is little more than a paper tiger because it does not apply to Pacific Gas & Electric?s $84.5 million in bonuses given to the top 17 executives?the motivation for the legislation. In addition, ensuring that ratepayer funds were not used for bonuses would be difficult because utility rates are not strictly tied to the actual costs of service, according to a committee analysis of the bill. There also has been a substantial decrease in utility audits by the California Public Utilities Commission (CPUC), the analysis added, making it more difficult to determine whether there was crossover bonus funding. A proposal surfaced to extend AB 2303 to solvent utilities, prohibiting them from paying excess bonuses with ratepayer funds, but Leno showed little interest in the suggested amendment. Another bill would give the CPUC flexibility to discontinue funding a program used to offset distributed-generation installations 1 MW and smaller when the account holds far more funds than needed to support the program. Edison-sponsored AB 2593, by Assemblymember Ron Calderon (D-Montebello), passed on a 6-0 vote. The bill was created because the amount of funds in the CPUC?s Self-Generation Incentive Program far exceeds demand. Edison collects $26 million a year from its customers to provide up to $4.50/watt of installed renewable energy. Since the program was begun in 2001, it has provided $15 million in incentives. The utility?s account held as much as $90 million and currently holds about $60 million.

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Bill to Rework $13 Billion in DWR Deals Stalled

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