State's Power Purchases Costlier Than Projected 
Tab is $6 million a day over Davis' requests 
Lynda Gledhill, Chronicle Sacramento Bureau
Friday, March 16, 2001 
,2001 San Francisco Chronicle 

Sacramento -- California has spent about $6 million more a day buying 
electrical power than originally projected, according to a confidential 
document obtained yesterday by The Chronicle. 
State power buyers spent $2.7 billion between Jan. 17 and March 11, averaging 
$49 million a day. That amounts to about $6 million a day more than lawmakers 
figured using Gov. Gray Davis' appropriations requests. 
The confidential document was prepared by the Department of Water Resources, 
which purchases power on behalf of the state. It was handed to a group of 
lawmakers in a subcommittee hearing Wednesday by Water Resources Director Tom 
Hannigan. 
To the public, the document presents the first day-by-day look at how much 
California is spending on power purchases. 
Although the document shows more money being spent than originally believed, 
it didn't startle any of the handful of senators and Assembly members who saw 
it. 
"I don't think it was a surprise," said Assemblyman Dick Dickerson, R- 
Redding. 
Although the state is supposed to recoup the money spent on electricity, 
analysts and lawmakers say the open spigot on the state's treasury could 
jeopardize the state budget and fiscal well-being in the short and long term. 
For example, the state's power spending could jeopardize new education 
programs and transportation projects. The nonpartisan Legislative Analyst 
warned last month that lawmakers shouldn't count on all the new projects in 
Davis' proposed budget. 
Also, California has already been placed on a watch list by several credit 
rating firms, because of the deep debt that could be incurred in helping the 
utilities become financially stable. The watch list typically precedes a 
credit rating drop, which would cause the state's interest on bonds and loans 
to rise. 
"This (power purchasing) has a dampening effect," said Jean Ross, executive 
director of the California Budget Project, an independent policy group that 
tracks state spending. "Nobody knows where the economy is going, and how the 
energy crisis will affect it, so no one will know what the revenues will look 
like in the future." 
The biggest day of power buying happened on Feb. 16 when the state spent 
nearly $81 million for electricity, or $435 per megawatt hour. The smallest 
day was March 10 when the state buyers spent $40 million, or $219 per 
megawatt hour. 
Michael Worm, an analyst with the investment firm Gerald Klauer Mattison & 
Co., said what the state paid was in line with current energy prices. 
"That's where energy prices more or less have been for quite some time," he 
said. "Of course, they are dramatically higher than they used to be." 
The governor's office has refused to release information on how much the 
state has spent, said Steve Maviglio, Davis' spokesman. Maviglio said if 
generators found out how much the state spent the day before, they could 
force up the price the next day. 
But Assemblyman Tony Strickland, R-Thousand Oaks, said the public had a right 
to know how its money way being spent. 
"People need to know exactly what it is costing to keep the lights on," he 
said. "We want to know the whole story -- not just pieces." 
Strickland, along with media organizations including The Chronicle, have 
filed public records act requests to obtain information on how much the state 
has spent, along with the details of long-term power contracts signed by 
Davis. 
The original bill that authorized the state to purchase power appropriated 
only $500 million, but allowed the governor to use up to $10 billion if 
needed for power purchases by notifying lawmakers. The governor's office has 
sent five letters since Feb. 5 to lawmakers notifying them that additional 
money was needed. 
Based on these letters, which in total have requested an additional $2.5 
billion, the news media and lawmakers estimated that the state was spending 
$43 million a day -- $6 million less than the actual costs shown on the Water 
Resources document. 
Since the state began purchasing electricity, the health of its budget has 
become dependent on a variety of things to come, making it as fragile as a 
house of cards. 
The money spent on power is taken from the state's general fund and is 
supposed to be returned through the issuance of state bonds. The bonds will 
be paid for with a portion of the rates that utility customers pay every 
month. 
- 
Tell Us What You Think Can you save 20 percent on your energy usage? Gov. 
Gray Davis is offering rebates for Californians who save on power starting in 
June, and if you've got a strategy for conserving, The Chronicle wants to 
hear it. Contact the Energy Desk, San Francisco Chronicle, 901 Mission St., 
San Francisco, CA 94103; or e- mail energysaver@sfchronicle.com. 
-- 
E-mail Lynda Gledhill at lgledhill@sfchronicle.com. 
Paying for Power
These charts show what the state spent for electricity on the spot market and 
the average price paid. For the time frame of Jan. 17 through Feb. 14, only 
periodic totals and averages were given.
Period             Amount spent
9 p.m. Jan. 17 
through Jan. 18      $13,595,121
Jan. 19 - 29         399,000,000
Jan. 29 - 31         136,546,472
Feb. 1 - 12          495,755,000
Feb. 12 - 14         152,087,316
 Chronicle Graphic


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