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California and the West

Bill to Cut Some Power Prices Stalls

Energy: Democrats balk at varying payment levels for alternative generators.


SACRAMENTO — Legislation aimed at cutting prices for more than a fourth of the power consumed in California stalled Tuesday, as Democrats questioned why a few alternative energy generators--some of them campaign donors--stood to receive higher payments than others.

Lawmakers working to unravel California's energy mess have been negotiating for weeks in an effort to cut the price paid to more than 600 generators of alternative power by more than half, to below 8 cents a kilowatt-hour.

Those alternative generators' contracts with utilities have shot up in recent months because of a rise in the price of natural gas. The cash-strapped corporations have suspended or made partial payments to the generators over the last few months, causing many to shut down or reduce their outputs.

But even as the lawmakers reached agreement that pushed the average price to near the 8-cent level per kilowatt-hour, some generators would have received higher prices under the bill by state Sen. Jim Battin (R-La Quinta).

Some of the generators that stood to benefit had donated to Battin's campaigns. One--Windtec Inc.--gave Battin a $20,000 campaign donation in 1999. Others contributed from $3,000 and $5,000 last year.

Battin acknowledged that he has received campaign contributions from some wind power generators but said there is no connection between the donations and the bill's provisions. "It is illegal, it is unethical and it's not how I do business," he said. Battin noted that 25% of the state's alternative energy producers are in his district.

As Democrats on the Senate Energy Committee blocked the bill, Battin warned that some alternative energy producers might react to the delay by trying to force Southern California Edison and Pacific Gas & Electric into bankruptcy.

"We will be the cause of bankruptcy," Battin said. That prompted Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) to retort: "I'm really tired of being threatened with bankruptcy."

Alternative energy producers, including those that use wind, solar power, biomass and other means, produce 27% of the energy used in California. They sell the electricity to the utilities, which in turn transmit it to retail consumers. But with the utilities facing multibillion-dollar debts, the alternative energy producers under contract with Edison have not been paid since November.

Scores of alternative energy producers supported the measure. Edison International and the San Francisco-based consumer group, the Utility Reform Network, opposed it. Michael Florio of the Utility Reform group said the deal could result in higher consumer prices; an Edison representative said the same thing.

Battin and Assemblyman Fred Keeley (D-Boulder Creek) worked out an arrangement with many of the generators. Keeley took the lead in the early negotiations, and then turned to Battin to introduce the legislation, SB 47X.

Rather convoluted language would have allowed higher payments to a select few generators that produce electricity from wind and biomass.

Most of California's wind suppliers, for instance, would have received about 6 cents per kilowatt-hour. But a handful of them, about half a dozen wind farms--mostly in the Palm Springs area represented by Battin--would have received 7.8 cents.

Battin contends that other wind producers receive additional payments that boost them to the same level as Windtec and others that would get the higher payments.

"They get the same deal," Battin said of the handful of generators that would benefit from the provisions he added to the bill.

In California's overall energy market, the amount of money that would have flowed to the favored generators is minor. But the added prices that would have been paid to the generators would have translated to at least $19 million in the next five years, to be absorbed by Southern California Edison customers, according to one analysis.

Also Tuesday, more details were disclosed about another leg of the state's effort to escape from the energy crunch--the deals with large power generators to supply electricity to California for as long as 10 years.

Those arrangements were announced by Gov. Gray Davis Monday as "the bedrock" of California's energy policy. But some consumer advocates warned that the deals could lock the state into excessively high-priced contracts.

S. David Freeman, the general manager of the Los Angeles Department of Water and Power and Davis' negotiator, said that the state guarded against that by varying the time spans of its deals. About 6,000 megawatts are expected to be available this summer, about one-third of the energy needed by the state, Freeman said. The amount of power under contract swells until more than 9,000 megawatts are contracted in 2004, half of the needed amount, before dipping to 8,000 megawatts in 2010.

"What we're doing here is what everybody said had to be done," Freeman said. "We deliberately bought 50% so we'd have a good mix between long-term contracts, which may turn out to be somewhat higher or somewhat lower than the spot market," and purchases on the spot market.

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