In view of uncertainties about the state?s long-term energy supply, Governor Arnold Schwarzenegger?s proposal to do away with the California Power Authority is premature, said the Legislative Analyst?s Office (LAO) in a February 18 budget analysis. ?Given the incompleteness of the budget proposal in addressing the availability of adequate supply and/or conservation to meet the state?s future energy demand, we think the Legislature may wish to retain some of CPA?s functions,? the LAO stated. The two key functions are the CPA?s bonding authority and its demand reserve partnership, which shaved 250 MW off peak demand in the summer of 2003. The LAO acknowledged that the power authority has not financed any new power plants, its raison d??tre, but the agency, like merchant generators, was sabotaged by a lack of long-term contracts. It recommended that the state retain the CPA?s bond revenue authority created to finance new power projects but consider transferring it to another agency, such as the California Infrastructure Bank, which is within the Treasurer?s Office. The nonpartisan state analyst also proposes transferring the Demand Reserve Partnership Program, which is supposed to deliver energy savings until 2007, to the California Energy Commission. The report also points out that Schwarzenegger?s 2004-05 budget blueprint lops $1.9 billion, or 23 percent, off the Department of Water Resources? power contract budget. ?This reduction is partly a result of the administration?s decision to defer its submittal of most of its resources bond proposals to later in the spring.? About $1.4 billion of the proposed reduction is based on DWR?s lower power cost and cheaper electricity prices.