SACRAMENTO — After months of defending the $43 billion worth of long-term electricity contracts he helped negotiate on behalf of the state, S. David Freeman suggested for the first time Monday that the contracts be renegotiated, perhaps through the new public power agency he now chairs.
"There seems to be pretty general agreement that these contracts need to be renegotiated," said Freeman, noting that critics of the contracts include Gov. Gray Davis, the president of the Public Utilities Commission and the leader of the state Senate.
Freeman said he is still proud of his work negotiating the contracts with companies Davis labeled at the time as gougers and pirates. But California's energy picture is vastly changed since January, he said.
In a daylong legislative hearing about what sort of role the 3-month-old California Power and Conservation Financing Authority should play, Freeman also seemed open to the idea of putting the vast hydroelectric network of Pacific Gas & Electric in public hands. The utility has proposed spinning off dozens of Northern California dams and reservoirs to an unregulated company that could charge market prices for what has long been one of the cheapest sources of power in California.
Called away from the helm of the Los Angeles Department of Water and Power last January to help Davis manage an emergency of soaring power prices and blackouts, Freeman told the Joint Legislative Audit Committee that his focus has shifted from crisis to the long-term shape of California's energy industry.
The 75-year-old public power guru, appointed by Davis to chair the new agency, said the state could give private energy companies a financial incentive to renegotiate the electricity contracts. The agency's ability to borrow money at below-market interest rates, Freeman said, should be attractive to the companies, which must finance the construction of power plants that may cost hundreds of millions of dollars.
In return for teaming up with the public power authority to get cheaper financing, he said, the companies might be willing to cut the prices in the contracts, some of which last 10 years, or give the state more flexibility in the timing and quantity of electricity that must be taken under the deals.
