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Big Power Pact May Be Axed


SACRAMENTO — At least one of California's bigger long-term power contracts could be declared void because of a state official's conflict of interest, according to a new analysis by the legislative counsel's office.

In an opinion requested in August by state Sen. Tom McClintock (R-Thousand Oaks), the Legislature's attorneys conclude that a Department of Water Resources manager probably violated state political reform laws by making decisions involving a company in which he had a financial interest.

The employee, unidentified in the legal opinion, owned $2,000 to $10,000 in Allegheny Energy Supply stock when he helped negotiate a 10-year, $4-billion contract with the company.

The department signed roughly $43 billion worth of long-term power contracts last spring, and only after Gov. Gray Davis made the contract public in the summer did it become clear that several of the state's electricity buyers and contract negotiators owned stock in energy companies with which the state did business.

The legislative counsel's office studied one employee's situation as an example, and said that for such a conflict to nullify a contract, a judge would have to conclude that it might not have been signed if not for the conflict of interest.

The stage is set for such a court test. McClintock and the U.S. Justice Foundation, a nonprofit group that describes itself as "your conservative voice in the courts," filed suit in November seeking to invalidate the contracts on grounds that they were negotiated in secret and violate conflict-of-interest codes and antitrust laws.

DWR spokesman Oscar Hidalgo questioned whether there is any conflict at all in the Allegheny contract. It is unique, he said, in that it was negotiated between the department and Merrill Lynch & Co., which then turned over the contract to Allegheny just before it was signed.

Atty. Gen. Bill Lockyer has opened his own investigation of whether Water Resources employees violated a code governing state workers.

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