In order to meet Sacramento?s growing demand for electricity, the Sacramento Municipal Utility District urged the Federal Energy Regulatory Commission to extend its long-term transmission rights contract with Pacific Gas & Electric. Insisting the matter be fast-tracked, SMUD said PG&E must extend the decades-old agreement that provides the district with 200 MW of firm transmission capacity until 2025. The deal is now set to expire in January 2005 if the utility does not extend what SMUD considers its ?unqualified right? to an extension under what is known at FERC as its right of first refusal. ?[C]ustomers executing long-term contracts have an expectation they will be able to continue transmission service beyond the expiration of the contract,? SMUD stated in its October 9 complaint to FERC. Thus, ?there is utterly no basis? for refusing to honor SMUD?s extension request, it added. SMUD sought a contract extension with PG&E at the beginning of the year. The muni agreed to pay the market transmission rate or meet the terms and rate offered by any competitive bid. In April, PG&E rejected the extension request on grounds it would violate the California Independent System Operator?s (CAISO) open-access tariff. The utility also claimed it could not extend the deal because it could not guarantee continued service because of agreements it has with third parties, which were coming to an end. SMUD continued to try to work out a deal with PG&E. In June, the muni asked the utility to confirm within two weeks? time that it would renew the contract for another 20 years but got nowhere and so filed the complaint. The transmission agreement between SMUD and PG&E dates back to 1964 and was amended several times. SMUD contends the contract rollover is required under FERC?s Order 888, which aims to promote competition via open access on a nondiscriminatory basis. Existing transmission rights contracts are a source of frustration for CAISO because it considers them ?sweetheart deals? that cause confusion and delays in grid operator performance. The long-term deals? guaranteed transmission capacity is not always fully used, and it is not until real time that CAISO knows whether there is unused capacity. The contracts are also said to be one of the sources of phantom congestion, according to the grid operator. PG&E disputes SMUD?s claims but declined to give specifics because it has not yet submitted its response to FERC. It is expected to submit its answer to federal regulators by the end of October, said PG&E spokesperson Jann Taber.