Davis indicates willingness to renegotiate power

The Associated Press
Friday October 19, 2001

LOS ANGELES — Despite concerns from one administration official that the state has secured enough resources to deal with the energy crisis, Gov. Gray Davis is considering renegotiating dozens of long-term power contracts, it was reported Thursday. 

The governor’s energy advisors announced they would hold a press conference Friday about the administration’s strategy for reworking the agreements, the Los Angeles Times reported. 

The Davis camp has defended the 53 long-term power contracts signed earlier this year that allow the state to buy electricity at set prices.  

Energy wholesalers have previously said they are willing to consider renegotiating the pacts but want the state to take the lead. 

Critics believe the prices agreed upon are too high and the contracts will provide more power than needed. 

In an internal memo, state Department of Water Resources Director Thomas Hannigan echoed those concerns and criticized S. David Freeman, chairman of California’s new power authority, for continuing to seek additional energy contracts. 

“The state already has excess power resources,” particularly in Southern California, Hannigan wrote in the Oct. 4 memo. Additional contracts would “exceed the state’s ability to absorb that power.” 

Freeman defends his actions, noting the state needs more power to ensure future shortages don’t occur. His agency has been talking with solar and wind energy companies as well as examining the purchase of additional electricity from peaker plants, which are used only during times of great need. 

The power authority needs the Department of Water Resources’ endorsement before it enters into contracts because the agency supplies the money to purchase energy. 

The state is currently purchasing power to meet some of the needs of 24 million people served by two of the state’s troubled utilities, Pacific Gas & Electric and Southern California Edison. While the contracts have stabilized energy prices, the state has been forced to buy electricity in recent months and then sell some of it at a loss because there was not enough demand.