The Department of Water Resources announced last week that it has restructured a 10-yearpower contract with Allegheny Energy Supply Co. to lower the contract's cost.
The revised contract lowers prices the DWR will pay and reduces the volume of power thatmust be bought over the contract's last eight years, while improving reliability andoperating flexibility, according to Gov. Gray Davis' office.
"This is further evidence that we are getting our energy future under control," Davissaid in a statement last week.
California officials say the revisions hacked $836 million off the cost of the contract,which is now valued at $3.4 billion. Allegheny contends the settlement decreases thevalue of the contract by only up to $190 million, according to a news release.
The contract was among dozens signed by the DWR in early 2001, during the energy crisis,so the state could avoid continued reliance on the volatile spot market for electricity.As prices for electricity declined after the crisis, critics said the contracts lockedthe state into prices that were higher than needed. The state is currently asking theFederal Energy Regulatory Commission to force companies to renegotiate or abrogatecontracts.
As part of the new contract, the state agreed to withdraw complaints pending at FERCagainst Allegheny and to settle a lawsuit against the company.
To date, the state has renegotiated 30-long-term power contracts with 15 parties to save$6 billion. The DWR's power contract portfolio is now worth about $33 billion.
The department issued $11.2 billion in power revenue bonds last fall to help pay for thecost of energy purchases.
Separately, Davis appointed Michael J. Spear as interim director of the DWR. He willreplace Thomas Hannigan, who resigned earlier this month. Spear has been a deputysecretary at the California Resources Agency since 2001. Previously, he worked at theU.S. Fish and Wildlife Service for 27 years.
