Public Utilities Commission Should Throw Out Rate Agreement in Light of DWR Conflicts
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NEWS RELEASE
Jul 30, 2001


CONTACT: Doug Heller - 310-392-0522 x309

Public Utilities Commission Should Throw Out Rate Agreement in Light of DWR Conflicts

Conflicts of Interest Reveal Basic Flaw in Far-Reaching Energy Proposal
The California Public Utilities Commission (PUC) should halt its plans to sign an irrevocable "Rate Agreement" with the state's energy buying agency, the Department of Water Resources (DWR), consumer advocates said in a letter to PUC President Loretta Lynch today. According to the Foundation for Taxpayer and Consumer Rights (FTCR), the recent firings of DWR power buyers and consultants, in addition to other on-going investigations into the propriety of that state agency's staff, demonstrate that the PUC should not hand over rate-making authority to an DWR, which would be allowed to operate out of the public eye under the proposal.

"The DWR is shrouded in a controversy of its own making, yet, in less than a month the PUC will vote on an unprecedented handover of authority to this agency." FTCR wrote in the letter to PUC President Lynch. "The rate agreement would cut off the public review process altogether, leaving California's energy procurement in the hands of an unaccountable agency with a track record that grows more dubious with each new revelation."

FTCR opposes the Rate Agreement because it would allow the DWR to raise electricity rates without PUC review and would give the DWR broad latitude to pass on a wide array of costs to ratepayers that might not otherwise hold up to public scrutiny. The consumer group argues that one important lesson from deregulation is that a lack of oversight and accountability can be very costly when dealing with a product as vital as electricity.

"Californians have been funding the state's electricity purchases in the dark for the last six months and have paid dearly for it," wrote FTCR. "Recent revelations about the DWR undermine the trust that Californians must have in the agency that is responsible for keeping the lights on and power prices stable in the wake of the deregulation fiasco."
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July 30, 2001

Loretta Lynch, President
California Public Utilities Commission
505 Van Ness Ave
San Francisco, CA 94102
Fax: (415) 703-3933

Via Facsimile

Re: DWR conflicts of interest and Draft Rate Agreement

Dear President Lynch:

On August 23rd, 2001 the California Public Utilities Commission (PUC) is scheduled to vote on the "Draft Rate Agreement" between the PUC and the California Department of Water Resources (DWR). In light of recent news that the DWR is rife with conflicts of interest -- five staff members fired as a result and on-going investigations-- we urge you to rescind the proposed rate agreement. The kind of exposure that led to these firings is only possible when there is a meaningful public process. The rate agreement would cut off the public review process altogether, leaving California's energy procurement in the hands of an unaccountable agency with a track record that grows more dubious with each new revelation.

Californians have been funding the state's electricity purchases in the dark for the last six months and have paid dearly for it. Until recently, the agency has provided very few details of its operating activities or its administrative structure and oversight. Recent disclosures about the DWR destroy the trust that Californians must have in the agency that is responsible for keeping the lights on and power prices stable in the wake of the deregulation crisis.

The behavior of DWR employees and leadership sheds a dramatic light onto the disturbing lack of accountability within that agency. The fired employees owned stock in the very companies with whom they were signing government contracts. According to a report today on the Dow Jones Newswire, the Securities and Exchange Commission is investigating concerns that some other DWR employees or consultants may have been engaged in insider trading based on information they have obtained as a result of their work at DWR.

Californians need the sunshine of open and accountable public agencies. The DWR is shrouded in a controversy of its own making, yet, in less than a month the PUC will vote on an unprecedented handover of power to this agency. It would be a mistake for the PUC to move forward with this proposal now that these conflicts, which were left undisclosed by DWR for six months, have come to light. The public cannot afford another day of unscrutinized power buying, let alone an irrevocable agreement that will allow the DWR to continue to operate without any checks and balances for as long as it is purchasing electricity on behalf of California consumers.

Please inform us of your intentions with regard to the disclosure of DWR conflicts of interest and the proposed rate agreement.

Sincerely,



Douglas Heller Emmy Rhine

Cc: Governor Gray Davis





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