Assembly Utilities and Commerce Committee Introduces DWR Oversight Legislation

SACRAMENTO – The California State Assembly Utilities and Commerce Committee, chaired by Assemblymember Lloyd Levine (D-Van Nuys), today introduced legislation that would require the California Public Utilities Commission (CPUC) to review any future renegotiations of the Department of Water Resources’ (DWR) energy contracts that were signed to meet the demands of California’s electric utilities.

Assembly Bill 3058 follows up on a recent hearing of the Utilities and Commerce Committee that looked into DWR’s renegotiation of the so called “Calpine 2” contract, which required Calpine to deliver 1,000 megawatts of electricity to California 24 hours a day, 7 days a week for a fixed price of 5.9 cents per kilowatt hour. Given the fact that utilities would have to pay 6.8 cents per kilowatt hour on the futures market today, the Calpine contract was clearly a good deal for California ratepayers.

The contract went from a contract for 1,000 megawatts of firm power to a contract for 180 megawatts of capacity after DWR’s renegotiation with Calpine, forcing Pacific Gas & Electric (PG&E) to scramble to purchase at least 820 megawatts of new electricity to replace what was lost in the old contract, and also looking into the possibility of a rate increase.

Current law requires the CPUC to review all new or renegotiated contracts signed by one of the electric utilities before the utility can recover the costs of that contract in rates. The same provisions do not apply to action by DWR, even though California ratepayers must pay the cost of the DWR contracts.

“Last month’s hearing confirmed to me what I had suspected all along – that DWR did not seek much outside input regarding its recent renegotiation of the Calpine 2 contract and in fact ignored much of the input they were given,” said Assemblymember Levine, who first announced his intention to author this legislation at last month’s hearing. “With 25 contracts left on the books, it is imperative that we have legislation requiring the CPUC to make sure DWR isn’t saddling California ratepayers with a bad deal that’s they’ll be forced to pay for.”

DWR currently has 25 energy contracts on its books, representing almost 20 percent of total electricity consumed in California. The power from these contracts is used to meet 26% of PG&E’s load, 28% of Southern California Edison’s, and 28% of San Diego Gas & Electric’s. If DWR left all the contracts in place they would all expire in the next two to four years.