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SAN FRANCISCO — California will save $3.5 billion on its long-term energy pacts, state officials said Monday, under reworked terms on eight contracts with four power companies, including San Jose-based Calpine Corp. 

Calpine and Baltimore-based Constellation Energy Corp. also agreed to pay $8.5 million to settle complaints filed with federal regulators that the companies charged illegal prices during California’s power crisis, state officials said at a press conference here to announce the renegotiated contracts. 

The settlement ends the state’s investigation into Calpine and Constellation, “who were willing to renegotiate their long-term contracts,” Attorney Bill Lockyer said in a statement. The two companies “were found in our investigation to have committed smaller violations compared to other energy companies.” 

In total, the state trimmed eight contracts with four companies that were originally worth $15 billion, reducing that amount by about 23 percent to $11.4 billion. 

The new contracts include stronger language that will ensure new power plants get built, said Barry Goode, Gov. Gray Davis’ chief counsel. In Calpine’s contracts, for example, the state can withhold grants or even terminate one deal, if the company doesn’t meet construction milestones. 

“One of the things we wanted to do in these contracts is cinch more tightly the building of these plants,” he said. 

Calpine’s Chief Operating Officer Jim Macias said the new agreements “resolve questions and uncertainty surrounding our contracts.” 

Calpine curtailed its ambitious expansion plans recently after a sharp decline in electricity prices, coupled with the fallout from Enron Corp.’s bankruptcy, saddled the company with a deteriorating credit rating. 

The company ended last year with $12.7 billion in debt, according to a U.S. Securities and Exchange Commission filing in March. 

Calpine’s four long-term deals were worth $11.7 billion and made up about 25 percent of the power the state arranged under the contracts. The longest deal, a 20-year contract with Calpine, will be cut to 10 years. 

The state signed 56 long-term power deals last year at the height of the power crisis. The California Department of Water Resources began buying energy in January 2001, after three utilities amassed billions of dollars in debts due to high wholesale costs and couldn’t buy energy for their customers. Davis has credited the long-term deals with taming the market and provide reliable supplies. 

Since the contracts were signed, wholesale electricity prices have dropped to less than half the $69 per megawatt hour average of the long-term deals, leading critics to say the state was rolled by the power companies and stuck consumers with a decade’s worth of high prices. 

In February, the state asked FERC to review some of the deals, saying the power sellers charged unfair prices and used illegal tactics to drive them higher. The state Electricity Oversight Board and the Public Utilities Commission had asked that the contracts’ costs cut by $21 million. 

While the state gets more flexible terms in the restructured deals, Calpine will benefit from having solid contracts, Macias said. Additionally, the state will no longer seek refunds from Calpine through the Federal Energy Regulatory Commission and the myriad of state energy agencies agreed to not challenge the “reasonableness” of the new contracts. 

S. David Freeman, chairman of the state’s Power Authority, led negotiations on the first batch of power deals, and participated in the effort to improve them. 

When the first contracts were negotiated, generators “had a gun to our heads,” he said. The state’s negotiators on the reworked deals “didn’t have a gun they could hold to the generators’ heads, but the terms they have worked for represent a vast improvement from what we did a year ago.” 

In a statement, Davis said he would still press federal regulators to investigate allegations that power companies manipulated the market in California. 

The remaining generators “that refuse to renegotiate contracts signed when the markets were dysfunctional, we’ll see them in court and at FERC,” he said.