BPA agrees to price cut on California contract

The California Department of Water Resources said the Bonneville Power Authority has agreed to reduce what it charges for electricity under a long-term contract signed earlier this year. The DWR also has asked Calpine Corp. and NRG Energy Inc. to renegotiate power supply contracts.

By the OGJ Online Staff

HOUSTON, Dec. 14 -- The California Department of Water Resources said the Bonneville Power Authority has agreed to reduce what it charges for electricity under a long-term contract signed earlier this year.

The average price of power for the 18 Mw contract was cut to $29/Mw-hr from $55/Mw-hr, the DWR said. The contract expires Apr. 31, 2002. Following a sharp decline in electricity prices, consumer groups and state lawmakers have stepped up criticism of high-priced contracts the California agency signed at the height of last winter's power crisis.

State lawmakers put the DWR in charge of buying electricity on behalf of the state's utilities after an unprecedented increase in wholesale prices outstripped the ability of the utilities to pay the bills. A retail rate freeze kept the utilities from passing the higher costs on to consumers.

A DWR spokesman declined to say if the agency is attempting to renegotiate other deals, but at least two companies have said they are in talks with the DWR. Independent power producer Calpine Corp. has said the DWR asked to redo its contract but has been closed mouthed about the details.

Calpine Corp. has three contracts to sell the DWR 2,500 Mw of power for about $13 billion over 10-20 years. The company also committed to spend $4 billion in 4 years to build power plants in California. Analysts estimated the deals were worth $70-$80/Mw-hr.

Officials with NRG Energy Inc. said during a conference call Friday DWR has approached them about renegotiating a contract, but CEO Dave Peterson said the company hasn't made any commitment. He said the NRG might be willing to accept a price reduction to existing market levels of about $30/Mw-hr in exchange for an extension of the contract.

"We could give them price flexibility without affecting our position," he said. NRG owns a net stake in 1,569 Mw of power plants in California.

DWR also reported it has signed a new 2-year, 200 Mw contract with Intercom Energy Inc. for peaking power for $45/Mw-hr. A DWR spokesman said two additional long-term power deals are still under negotiation.

DWR has signed 56 long-term power purchase deals with 29 counterparties. The contracts, including those still under negotiation, are worth an estimated $42 billion. DWR said these costs were accounted for in its revenue requirement filed with the California Public Utilities Commission in November.

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