State power buys likely will remain shrouded in secrecy
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NEWS RELEASE
Aug 29, 2001

State power buys likely will remain shrouded in secrecy

It took months of legal pressure from Republican lawmakers and news organizations to force California officials to reveal just how much electricity state officials bought with $43 billion of ratepayer money.

And obtaining similar information may soon grow more challenging.

State power regulators are prepared to sign away their authority to scrutinize and repeal spending decisions made by the Department of Water Resources, the state agency that buys power for three ailing utilities.

Consumer advocates, businesses and utilities all complain they're being kept in the dark about how the state is spending their dollars, and point out the DWR has not given them complete information about power purchases.

"It's been a series of misstatements and conflicting data that's been coming from DWR that's hampered our efforts to fully analyze their data," said Ron Low, a spokesman for Pacific Gas and Electric Co.

Assemblyman Fred Keeley, D-Boulder Creek, who wrote legislation earlier this year that allowed the DWR to avoid public review, says that does not mean the DWR is exempt from detailing its actions.

"The DWR should explain its revenue requirements," Keeley said, "and if people are making requests for them to do so, in a public setting ... I hope they would not hide behind any lack of legal obligation as their justification not to do so."

Wednesday marked the third straight day the Public Utilities Commission delayed announcing how much money the utilities can expect to share with the DWR, after months of delay in getting the necessary information from the DWR.

Gov. Gray Davis and the DWR have argued that releasing too many details could cause the state to lose its edge when negotiating power contracts.

"Folks have had an opportunity to look at the numbers and to react to them and comment on them publicly," said DWR spokesman Oscar Hidalgo. "At this point, we're following that process."

Without knowing the context of the purchases, critics say, it's hard to know in whose interest the state is acting.

If the ratepayer money it skims off electric bills is not enough to pay for that year's megawatts or administrative costs, the DWR can tell state power regulators it needs electric rates to rise.

Within 45 days, the utilities commission would order PG&E, Southern California Edison Co. and San Diego Gas and Electric Co. to boost electric bills under a plan the commission could adopt at its Sept. 6 meeting.

State lawmakers decided in January the PUC must not stand in the way of the DWR's collecting enough money to pay its bills, as part of an effort to prove to Wall Street that California bonds were trustworthy.

"There was deep concern in the investment community that the PUC may second-guess the revenue requirement of the Department of Water Resources, and if that was the case, the bonds couldn't be sold," Keeley said.

The state plans to issue nearly $13 billion in bonds to start recouping the $9.5 billion it has spent buying power since January. Bonds or no, changing the PUC's role has long-term implications, said PUC Commissioner Richard Bilas.

"The oversight that you need is the oversight that says these contracts are bad, and therefore they're null and void and must be renegotiated," Bilas said.

"When we oversee utilities, if they are overcharging it comes out of the shareholders' hide. If the state is overcharging, whose hide is it going to come out of? It's going to be the ratepayer or taxpayer."

Unlike the other regulated utilities, the department will not have to publicly defend its spending decisions, such as the $9.5 billion it has spent thus far buying electricity, or prove it acted in the ratepayers' best interest.

"The reason we need openness in government is to be sure the people working on behalf of the taxpayers are truly serving the public interest and not their own personal interest," said Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Heller said the lack of public review gives less incentive for the state to be cautious with ratepayer money, a growing concern after Davis disclosed several of his top energy officials owned stock in the same companies that are selling power to and building power plants in California.

PG&E and other utilities have demanded the department hold a public hearing before the PUC puts a financial structure into motion.

In a letter sent Wednesday to all northern and central California lawmakers, PG&E asked legislators to urge the PUC to withdraw the DWR rate agreement. The utility says it will shift $500 million in costs to PG&E customers and away from Edison and SDG&E customers.

"This $500 million cost-shifting proposal was announced by the CPUC Monday in a press conference in Sacramento, even though it has not been subject to public review or hearings," the letter said.

The draft rate agreement was released while the Legislature was debating a rescue plan for Edison, which PG&E said "may not be coincidental, given the intent of the CPUC proposal may be to fund Edison's debt repayment plan on the backs of PG&E customers.

PG&E called the proposal illegal, said it unfairly discriminates against its customers, and asked lawmakers to ask the PUC to stop the item from going forward.

"I don't think the DWR should have any resistance in explaining how they arrived at those numbers," Keeley said. "They should explain those, and if they can't, they ought to go back and figure out how they can."

Hidalgo said the DWR has followed PUC rules and has no plans to have a separate public hearing on the matter.




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