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Lawsuit would void state’s long-term energy contracts

The Associated Press
Thursday May 02, 2002

PASADENA, Calif. — A lawsuit filed Wednesday seeks to void the $43 billion in long-term energy contracts that California signed to end last year’s power crisis. 

The suit contends that contracts reached last year with 30 energy providers are improper because one of the state’s consultants had a conflict of interest. 

Vikram Budhraja of Pasadena was on a $100,000 retainer for the parent of Southern California Edison while advising the state on deals designed to rescue the utility from bankruptcy, according to the suit. 

Decisions should not be “tainted by the kind of financial entanglements as are abundant with these energy contracts,” state Sen. Tom McClintock, R-Thousand Oaks, one of eight GOP legislators who filed the lawsuit in Los Angeles Superior Court. 

The suit names Budhraja, the energy providers and the state Department of Water Resources, which was involved in the power contracts. 

McClintock, who is running for state controller and has long opposed the energy policies of Democratic Gov. Gray Davis, contends that the contracts overcharged California by as much as $14 billion. 

Budhraja disclosed the retainer in conflict of interest forms, and stayed out of deals that specifically would have benefited Edison, said Oscar Hidalgo, spokesman for the Department of Water Resources. 

He noted that the state attorney general’s office and the federal Fair Political Practices Commission began investigating the potential conflicts of interest last year. 

“There’s nothing new here. It’s a recycled item,” Hidalgo said. “It strikes as a political ploy to keep this issue somehow alive and in the news during an election year.” 

“We’re confident that this lawsuit will be laughed out of court,” said Steve Maviglio, a spokesman for the governor. 

California signed 56 long-term power deals last year at the height of the power crisis. The Department of Water Resources began buying electricity in January 2001, after high wholesale costs sent Edison and two other utilities deep into debt and left them unable to purchase power for their customers. 

Davis has credited the long-term deals, which range up to 20 years, with taming the market and providing reliable supplies. At the time, the contract prices for the state’s power sales were 75 percent lower than spot market rates, Maviglio said. 

Since they were signed, however, 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 of high prices. 

The administration recently renegotiated eight contracts, saving about $3.5 billion, but McClintock contends that the state still was drastically overcharged. 

The lawsuit plaintiffs also include the United States Justice Foundation, a nonprofit group that describes itself as “your conservative voice in the courts”; state Sen. Ross Johnson, R-Irvine; Republican Assembly leader Dave Cox of Fair Oaks and five other GOP Assembly members. 

McClintock and the foundation also sued to void the contracts in November. That suit against Davis and the water resources department claimed the contracts were invalid because they were negotiated in secret and allegedly violated antitrust laws. A hearing in that suit is scheduled for May 17.