Assemblymember Levine Statement on Termination of Water Resources-Calpine 2 Power Purchase Agreement

LOS ANGELES – Assemblymember Lloyd Levine (D-Van Nuys) today issued the following statement regarding the California Department of Water Resources’ (DWR) announcement that it has restructured a contract it has with Calpine Energy Services:

“We all remember the dark days of California’s energy crisis, and since that time the state has taken positive steps to avoid future power shortages,” said Assemblymember Levine, the Chair of the Assembly’s Utilities and Commerce Committee. “However, DWR’s decision to terminate what many feel to be its best power contract, without consulting utilities, consumers, or the Legislature is unconscionable.

“In essence, what DWR did was get rid of the supply without satisfying the demand,” Levine continued. “DWR of all agencies should know the forecast for Summer 2008 looks tighter than normal due to lower rain and snow fall and the resulting impact on hydro power. The end result of this renegotiation is that PG&E will be forced to replace up to 800 MW of power at a higher price, ultimately passing the additional cost on to its customers.

The current contract requires DWR to pay Calpine $525 million annually for 1,000 MW of energy delivered year-round through 2009. Since PG&E is required to have at least 115% of its forecast summer peak load under contract by June, the utility will now have to sign new contracts to replace the power DWR just negotiated away. Based on current market prices, the new contracts will cost PG&E ratepayers millions of extra dollars. Additionally, depending on the source of the new generation, the new contracts could add to more congestion on California’s electricity transmission grid, which could lead to rolling blackouts.

The Assembly Utilities and Commerce Committee will be taking a further look at this contract in the weeks ahead.