Calif PUC To Pass Power-Bond Measures By January: PUC Counsel

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FYI. Interesting comments by PUC Counsel regarding DWR/PUC Rate Agreement and LT Contracts.

Best,
Jeff

Calif PUC To Pass Power-Bond Measures By Jan -Counsel

Nov. 1, 2001
LOS ANGELES -(Dow Jones)- California utility regulators expect to approve a measure in January that will allow the state to sell $12.5 billion in bonds to repay the state's general fund and banks for power purchases made this year.

Delays in the bond issue, originally planned for May, may deepen the state's budget deficit in the coming fiscal year and threaten to further tarnish the state's credit ratings.

"At this point, we are aiming to have everything done by January related to the revenue bond sale," said Gary Cohen, general counsel for the California Public Utilities Commission.

The PUC refused earlier this month to pass a so-called rate agreement, which would spell out how the bonds would be repaid, because it would give the the state's power buying arm carte blanche to raise electricity rates without public hearings and without oversight by the PUC.

In addition, PUC President Loretta Lynch wants the governor's office to renegotiate the tens of billions of dollars in long-term power contracts it signed with more than a dozen energy companies at the peak of the market. One of the commission's objections to the rate agreement is that it would lock the state into overpriced, overlong deals that will saddle ratepayers with high electricity costs for the next decade.

So far, neither the state nor the PUC have identified which power pacts they want to renegotiate. Spokesman for Dynegy Inc. (DYN), Williams Cos. (WMB) Calpine Corp. (CPN) and Sempra Energy Resources, a unit of Sempra Energy (SRE), have said they haven't been formally contacted by state officials to talk about renegotiating the deals.

Williams and Dynegy said they would consider renegotiating the contracts, but only if the result would benefit both parties. Calpine said it would be difficult to rewrite the pacts, but the company is willing to talk with state officials.

The PUC met with members of Gov. Gray Davis' staff last week to figure out a strategy for renegotiating the contracts, and talks are ongoing, Cohen said.

"We are all in agreement that we want to renegotiate at least some of the contracts," Cohen said. "We have technical people looking at the contracts to figure out what we want to accomplish, what kind of portfolio we want in terms of duration and price. My view is we need to have a solid plan before we embark on renegotiations."

Steve Maviglio, a spokesman for Davis, said the governor's office had no comment on the renegotiation talks.