DWR Shaves $194 Million Off Contract Costs

The Department of Water Resources? updated revenue requirements for 2003 and 2004 are projected to be $194 million less than previously estimated. The lower price tag falls well short of Pacific Gas & Electric?s estimated reduction, which the utility put in the $470 million range (see Circuit , Feb. 27, 2004). The savings?whatever the final number may be?will lower the bills of all investor-owned utilities? ratepayers. DWR originally estimated its power costs at $4.517 billion but sliced off nearly $200 million in its March 10 proposed true-up. The final amount of savings is expected to be higher because it will include settlement funds from the state?s contract renegotiations with El Paso Energy, which are not yet final. ?Recent developments indicate progress is being made; however, at this time, the Department is unable to predict when the proceeds will become available,? states DWR?s supplemental revenue requirement proposal. ?We intend to ask that the amount be factored in to further reduce DWR?s revenue requirement,? said Ron Low, PG&E spokesperson. Southern California Edison is in the process of crunching the numbers and is expected to have a response by the middle of next week, said Gil Alexander, Edison spokesperson. DWR received an unanticipated $275 million in income last year, which includes higher revenue from power sales and $15.5 million from the El Paso Energy?Federal Energy Regulatory Commission settlement. At the same time, its power costs were $180 million above what was expected in 2003. This year, DWR forecasts it will reap $171 million more in revenue than anticipated last September but faces a $72 million rise in power costs. The power tab will increase because 2004 is a peak power year under the controversial long-term contracts signed in haste at the height of the energy debacle. Last year, the California Public Utilities Commission required the utilities to take over operation of the DWR contracts, but the state is financially responsible for the deals made to cover the power void caused by the utilities? inability to buy high-priced power during the energy crisis. Next year, the amount of power the state is required to buy will begin to ramp down. Part of this year?s higher cost forecast is attributed to PG&E?s Diablo Canyon nuclear plant going off line for maintenance for close to two months, according to DWR spokesperson Oscar Hidalgo. As a result, dispatch of the long-term contracts PG&E is operating will be boosted to fill in the Diablo power gap. How that power cost will be allocated, and whether it will be limited to PG&E ratepayers, will be determined by the CPUC. DWR?s costs and forecast of net expenses and revenue will be sent to the CPUC in about 30 days, following public input.

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DWR Shaves $194 Million Off Contract Costs

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