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NEWS RELEASE
Dec 20, 2001


CONTACT: Doug Heller - 310-392-0522 x309

State Audit Says Energy Contracts Are Terrible, State Rushed Into Bad Deals

Public Audit Confirms Urgency of Renegotiating Ten-Year Power Contracts
An audit of the state's energy contracts released today by the Bureau of State Audits sheds more light on the long-term impact of the California energy crisis and the need to renegotiate the terms of the power contracts. According to the audit, the Department of Water Resources (DWR) was ill-equipped to handle the responsibility placed on it by the Legislature and at the urging of Governor Davis. The audit concludes that California consumers are still subject to severe cost risks and reliability concerns even after committing nearly $43 billion to power purchase over the next decade.

"It is impossible to review this audit without asking why Governor Davis has yet to demand the renegotiation of the power contracts," said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights. "If the contracts are not reformed, then California is stuck with the energy crisis for another ten years."

The DWR rushed into many of the contracts in a manner that "precluded the planning and analysis that are necessary for developing a portfolio of this magnitude," according to the audit. In light of the manipulation of the state's deregulated energy market, consumer advocates argue that the contracts may be voided because of the environment in which they were negotiated.

"The power companies held California hostage, with spiking prices and rolling blackouts as their weapon. While the Governor must attempt to fix the contracts to ensure a reliable and affordable supply of power, the Attorney General should be prepared to challenge these contracts outright, on the grounds that they were signed under duress," said Heller.

Click here to read an executive summary of the audit and the full report.

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