CPUC Eases Water Dept. Efforts to Escape Power Business

By Published On: November 21, 2008

Regulators provided the state’s Department of Water Resources a path to help get it out of buying energy for the state. The California Public Utilities Commission voted November 21 to appoint a working group to find ways to extricate the agency from its remaining power purchase contracts. “Today’s decision opens the door to renegotiation or reassignment of the long-term contracts for electricity signed by the state at the height of the deregulation disaster, despite a warning from legislative leaders not to pursue such a course of action,” warned The Utility Reform Network. However, in 2004, the Legislature entertained a bill to accomplish that end but it failed. The department has been trying to get out of the power buying business. It was forced by the state to be a buyer of last resort during California’s 2000-01 energy crisis when investor-owned utilities did not have the financial means to purchase electricity during the deregulation meltdown. Ratepayers paid dearly for the emergency contracts, but they are credited with averting rolling blackouts. The latest move is part of regulators’ process to reconsider direct access for utility customers. Organizations representing small consumers, like TURN, oppose direct access. Organizations representing large consumers, like the California Manufacturers & Technology Association, promote consumer choice. Direct access allowed consumers to avoid bundled utility service. Consumers may contract directly with power providers for their needs. It was allowed for both small and large consumers under the mid-1990s’ deregulation scheme. It was halted when the energy crisis hit. “We shouldn’t rush to dive back in to direct access,” said commissioner Tim Simons—even though he voted for the measure. However, commissioner John Bohn promoted the vote. “It tries expeditiously to return what could be millions of dollars to ratepayers,” he said. That return may be accomplished by the working group. This stakeholder group is set to review the remaining contracts. Its first targets are two contracts the department holds. One is a $6.6 billion deal with Sempra Energy Resources and the other is a $2.3 billion agreement with Coral Power. Neither DWR nor the utility can unilaterally require any of these counterparties to renegotiate their contracts. “It’s a consensus that these contracts pose the biggest challenges,” said Mike Peevey, commission president. In other commission moves, regulators approved a $1.3 million water/energy pilot program. “It’s reducing energy consumption by reducing consumption of water,” said Bohn. “The nexus of water and energy is critical.” Commissioners overrode the administrative law judge’s recommendation to deny the pilot.

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