Many Power Deals Announced By Calif Gov Still Not Final

Many Power Deals Announced By Calif Gov Still Not Final
By Jason Leopold

03/07/2001
Dow Jones Energy Service
(Copyright © 2001, Dow Jones & Company, Inc.)

OF DOW JONES NEWSWIRES

(This article was originally published Tuesday.)

LOS ANGELES (Dow Jones)--Many of the long-term power supply contracts
announced by California Gov. Gray Davis this week remain under negotiation or
are the subject of ongoing lawsuits, power suppliers said Tuesday.

The lack of finality to the deals raises questions about the state's success
in covering its power needs, particularly going into what is expected to be
an unusually tight summer.

Generators said privately they were surprised the governor went ahead with
his announcement Monday, given that many of the contracts haven't been signed.

David Freeman, general manager of the Los Angeles Department of Water and
Power, who negotiated the contracts on behalf of the state, conceded that
details remain to be worked out.

"This is not a done deal," Freeman said, adding that credit concerns are
keeping generators from signing the deals.

Davis announced Monday that California has secured 40 long-term contracts
that will provide California with about 629 million megawatt-hours of
electricity over 10 years, at a price of more than $40 billion.

Several of those forward deals, however, involve contracts originally held by
Edison International (EIX) unit Southern California Edison and PG&E Corp.
(PCG) unit Pacific Gas & Electric at the California Power Exchange,
previously the state's main power market.

The governor seized those contracts earlier this year, just before the Power
Exchange liquidated them to cover hundreds of millions of dollars in power
bills the utilities had failed to pay.

The contracts, which total about 1.3 million megawatt-hours of electricity
and have a market value of about $1 billion, according to market sources,
have yet to be paid for or signed over to the state. Duke Energy (DUK), one
of the suppliers that sold the contracts to Pacific Gas & Electric and
Southern California Edison, has sued Davis for unlawfully commandeering those
contracts.

Although Duke has reached an interim settlement to continue providing power
to the state Department of Water Resources until April 30, the company and
the Davis administration still have to "develop a comprehensive long-term
settlement to pay for the power supply contracts," said Duke spokesman Tom
Williams.

The governor went ahead with the announcement, because the California
Department of Water Resources believes it will be able to finalize and sign
the contracts over the next several weeks, Davis spokesman Steve Maviglio
said.

Separately, several suppliers named in the governor's announcement Monday -
including Duke, Reliant Energy Inc. (REI), Mirant Corp. (MIR), Sempra Energy
(SRE), Enron Corp. (ENE) and Avista Corp. (AVA) - said they have yet to sign
final agreements with the state, although negotiations were ongoing.

"We are working in good faith with the DWR toward a long-term contract," said
Art Larson, spokesman for Sempra Energy Resources, a unit of Sempra Energy
(SRE). Larson said Sempra signed a terms of agreement with the DWR and
expects to reach a final agreement over the next several weeks.

Reliant Energy said it has only signed a short-term contract with the state
that expires in about two weeks. The company will only sign a long-term
contract once it's paid more than $400 million owed by Pacific Gas & Electric
and Southern California Edison, spokesman Richard Wheatley said.

Mirant Corp. said it also won't sign contracts with the state until it's
paid.

Enron said it's reached agreement on terms with the state, but has some
credit-related details to hammer out.

"Everything's been agreed to except for some credit technicalities," Enron
spokesman Mark Palmer said.

-By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.