SACRAMENTO — An unprecedented Internet auction that would make the state the largest power purchaser in California yielded dozens of bids with prices that averaged higher than officials had hoped but significantly lower than they had feared.
Davis administration officials released only skeletal details about the bids and said they were turning to veteran public power expert S. David Freeman, head of the Los Angeles city electric agency, to negotiate final deals with the power providers.
"This is good news," Gov. Gray Davis said Wednesday night, flanked by legislative leaders of both parties. Davis hailed the bids as the first step toward recovery as the state endured its ninth straight day of extreme power shortages.
Davis also named other members to a team of advisors on the energy crisis, who--like Freeman--will serve without pay. They are Michael Peevey, former head of Edison, and Frank Zarb, CEO of Nasdaq and a former Ford Administration energy official instrumental in structuring a public takeover of the troubled Long Island Lighting Co. in 1997.
The state received bids from 39 power companies, which offered prices averaging 6.9 cents per kilowatt-hour, above the 5.5 cents Davis had sought.
But the figure is within the range--up to 7.4 cents--that some lawmakers say contracts must meet in order to keep consumer rates stable.
The auction was the latest move in the Davis administration's struggle to save the state's largest electric companies from bankruptcy without raising rates for consumers. Caught in an economic storm unleashed by California's deregulation of electricity, Southern California Edison and Pacific Gas & Electric Co. have been saddled with soaring wholesale electricity costs and mounting debt that made them unable to continue buying power.
To seal deals under which the state would buy one-third of the state's electricity on behalf of the utilities for up to 10 years, Davis said he would rely on Freeman, head of the Los Angeles Department of Water and Power and a veteran of several public power authorities.
Bids Sent Over Internet
The Davis administration solicited bids over the Internet in a 27-hour process that ended at noon Wednesday. As a sense of urgency built in Sacramento, officials from the state Department of Water Resources reviewed several bids from energy producers seeking to sell the state power. One bid spanned 40 pages.
Water department Director Thomas Hannigan said most of the 39 bidders complied with state specifications. The average of 6.9 cents per kilowatt-hour covered energy use day and night, but not so-called super-peak periods when power demand is highest and electricity is most expensive.
By offering prices over long periods lower than those they are now charging, power-plant owners would lose money in the first few years but recoup it in the later years of the contract, when power supplies are expected to increase.
State officials left unanswered several key questions: which companies submitted bids, how much energy they offered to sell, and over what periods.
With utilities shut out of the power market, the state has already spent much of the $400 million allocated last week to the Department of Water Resources to tide over the utilities while a long-term plan is arranged. State officials contemplate issuing up to $12 billion in bonds to finance the purchase of electricity through contracts, but Davis has not said whether they would be handled through the water agency or a new power authority.
In another development that probably will be part of an overall solution to the power crisis, state Sen. Jim Battin (R-La Quinta) said a deal was near completion between the utilities and the independent producers of "green" energy such as solar, wind and geothermal power. A sticking point remained, he said, between Edison and some of those producers.
Battin said the agreement would slash in half the amount that the utilities have been paying the producers by bringing the price of a kilowatt-hour down to less than 8 cents.
"Pretty much everyone is in agreement," Battin said. "The contracts are getting written."
Independent producers account for about a third of the state's generation. Leveling the prices that the utilities pay to the producers has been a key element in helping to stabilize the state's energy crisis.
Battin said he did not believe that the new rate would force any of those energy producers out of business.
"I think they'll do fine," he said.
Davis administration officials said Wednesday that the work of shaping state power contracts will be left to Peevey and Los Angeles power chief Freeman, 75, an eccentric native Tennessean with a rich history in the energy world. Known as a tough and wily negotiator, Freeman has spent most of his career buying and selling power for government-owned utilities.
"We need a professional buyer," Battin said. "I don't think there's any objection to [Freeman]."