California officials yesterday announced that they trimmed $1.4 billion from an agreement with one of the biggest companies accused of gouging consumers during the electricity crisis last year.
While hailing the revised agreement as a victory, the officials cautioned that the new deal wouldn't lower ratepayer bills.
The settlement with Williams Cos. of Tulsa, Okla., reduces what had been a $4.3 billion supply contract and ends lawsuits by the attorney general and private attorneys alleging that Williams violated California law during the crisis.
The company admitted no wrongdoing in the agreement. However, it pledged to cooperate with the state in its continuing investigation of the soaring electricity prices of the 2000 and 2001 crisis.
Much of the state's $1.4 billion in savings from the Williams settlement comes by eliminating provisions that required California to buy electricity from the company regardless of whether it was needed.
Spokesmen for Gov. Gray Davis and Attorney General Bill Lockyer said that some of this electricity probably will be purchased anyway, meaning that the savings to consumers will be less than the $1.4 billion trimmed from the contract.
In addition, the price of electricity under the new deal remains between $62.50 and $87 per megawatt hour, or roughly double current power prices.
The deal was hailed as an improvement by the governor.
"The new contract provides us with reliable electricity delivered at more favorable terms," said Davis.
Michael Florio, an attorney with The Utility Reform Network in San Francisco, a consumer group, agreed that the revised deal had improved provisions but added that some of the electricity under the new contract seemed more expensive.
"There's some benefit in the new agreement, but we're paying a high price for it," said Florio.
State officials said some savings would come from a new provision allowing California to lock in what they characterized as low natural gas prices. The gas will be used to generate electricity for the state.
Williams also has agreed to make a cash payment of $147 million, provide $180 million in electricity price reductions and give the state $90 million worth of combustion turbines, which are used to generate electricity.
At least two of those turbines will be provided to the San Diego region, state officials said.
The settlement with Williams is part of an ongoing effort by the state to renegotiate what had been $43 billion in long-term electricity contracts signed at the peak of the crisis last year. First hailed as a solution to the crisis, California has since argued that the contracts were signed under duress and bind the state to expensive electricity costs for up to 20 years.
California has now trimmed about $5 billion from the initial $43 billion portfolio.
The state is asking federal regulators to terminate or revise the remaining agreements, as well as order $9 billion in refunds for other electricity purchased during the crisis.
The officials from California declined comment on efforts to renegotiate a $7 billion contract with Sempra Energy, parent company of San Diego Gas & Electric.
State officials said yesterday that legal actions against Williams could be restarted if evidence arises that the company engaged in criminal misconduct or fraud. The agreement can be revoked until mid-December, should Williams fail to provide adequate cooperation in investigations of the crisis.
"We think we did well," said Bill Lockyer, California's attorney general. "Williams was motivated because the company is on the brink of bankruptcy."
Williams and other energy companies have seen credit ratings fall and trading businesses evaporate since the end of the energy crisis in California and the collapse of Enron Corp. last year.
Lockyer said the total of cash payments and credits that Williams will provide under the settlement is $417 million, compared with an $8 million fine levied against the company last year by the Federal Energy Regulatory Commission.
"That pretty well summarizes our view about FERC – that we were lucky to get one-50th of our claims from them," said Lockyer.
The attorney general further noted that his office continues to pursue some 50 lawsuits against power suppliers related to the electricity crisis.
The settlement with Williams also ends class-action suits brought by a number of lawyers against the company.
Michael Aguirre, a San Diego attorney who was among the first to file suit against suppliers during the crisis last year, said the deal with Williams will prove to be unique.
"Williams has this deal because they settled first and we get a valuable cooperation provision," said Aguirre. "Every other defendant will have to pay substantial recovery to the state."
Craig Rose: (619) 293-1814; craig.rose@uniontrib.com
