SACRAMENTO — Seeking to stabilize California’s wild energy market, the governor Monday pursued the first of $10 billion in state power-buying agreements and seized millions of dollars in utility electricity contracts.
Gov. Gray Davis used emergency authority to claim at least $150 million in Pacific Gas and Electric Co. power contracts, just before they would have been taken by one of the utility’s creditors.
The PG&E options to buy long-term power were held as collateral by the California Power Exchange, the state’s electricity marketplace. PG&E defaulted on payments to the exchange, and the PX wanted to sell the contracts.
Long-term contracts provide power far more cheaply than purchases on the spot electricity market.
Davis signed a $10 billion measure last week that lets the state sign agreements for up to a decade to buy power for customers of PG&E and Southern California Edison, both denied credit by suppliers.
Edison and PG&E, the state’s two largest utilities, say they have lost $12.7 billion since June due to high wholesale electricity costs that the state’s 1996 deregulation law blocks them from passing onto consumers.
The Davis administration will reimburse the Power Exchange for the PG&E contracts, Deputy Attorney General Ken Alex said. A price was under negotiation.
Davis on Friday used the same authority – granted under a state of emergency he declared last month – to seize about $300 million in Edison contracts.
The exchange wanted to sell them after the utility defaulted on a $215 million payment.
The PX last month barred the financially ailing utilities from trading on it unless they posted new collateral.
As of Monday, PG&E owed about $1.34 billion to the exchange, suppliers and the Independent System Operator, keeper of the state’s power grid, according to PG&E spokesman Jon Tremayne.
A San Francisco Superior Court judge issued a temporary restraining order last week blocking the exchange from selling the contracts to give Davis time to decide if he wanted them. Davis took the contracts just before a Monday morning hearing on the restraining order.
The governor’s action came as his administration neared Davis’ self-imposed deadline of the close of business Monday to finalize the first long-term contracts authorized by a $10 billion law he signed last week.
The new law lets the state spend up to $500 million on the costly spot market to keep the lights on for Edison and PG&E customers in the meantime. California spent more than $500 million since mid-January buying power day-to-day as lawmakers worked on the legislation.
California’s energy problems – driven by high wholesale prices, high demand, a tight supply and transmission glitches – are expected to persist through the summer.
A federal order requiring electricity suppliers to sell to the state despite concern about utility solvency expires at midnight Tuesday, and Davis has said he doesn’t expect it to be extended.
In preparation for the order’s expiration, the ISO sent letters to about 140 generators, asking them to confirm that they will continue to sell power to the state.
The letter sparked numerous complaints and one lawsuit, filed Friday in federal court in Washington, D.C., by Reliant Energy Corp. The supplier contends it shouldn’t have to bear the cost of California’s energy crisis.
“Negotiations are continuing regarding what’s going to happen when the order expires,” ISO spokeswoman Lorie O’Donley said.
Meanwhile, California entered its fourth straight week under a Stage 3 power alert, with electricity reserves at risk of falling to 1.5 percent. No blackouts were expected, however.
Reserves were tight in part because of a weekend fire at the San Onofre nuclear plant that took 1,100 megawatts off the grid. One megawatt is enough to serve roughly 1,000 homes.
Plants capable of producing a total of 8,700 megawatts of power were out of service Monday, ISO spokesman Patrick Dorinson said.