Generators don't RSVP to Gov. Davis' invitation to share 'financial pain'

California nonutility power generators were stunned by published reports Wednesday Duke Energy Corp. had cut a 'secret' deal to compensate the state for alleged 'overcharging' for power sales in return for calling off state investigations and lawsuits. Most said they haven't decided whether to attend a meeting with Gov. Gray Davis next week.


By Ann de Rouffignac
OGJ Online

HOUSTON, May 2 -- California nonutility power generators were stunned by published reports Wednesday Duke Energy Corp. had cut a "secret" deal to compensate the state for alleged "overcharging" for power sales in return for calling off state investigations and lawsuits.

After Duke offered to "share the financial pain of a troubled market," Gov. Gray Davis's office invited other generators to Sacramento to discuss how they too could begin sharing the pain.

Generators Reliant Energy Inc., Dynegy Inc., and Mirant Corp., and Williams confirmed that they had been "invited" to meet with Gov. Gray Davis to discuss California's energy crisis. The meeting, if generators attend, is set for May 8.

"We had no knowledge of what Duke was doing until we read about it," said Chuck Griffin, spokesman for Mirant. However, the company acknowledged receiving a phone call from Davis's office and is undecided about whether to attend.

"We are telling the state that we want to pursue solutions but not necessarily a settlement like that," Griffin said. "We are willing to work constructively for solutions and any solution must involve more generation on the ground."

Reliant also was taken by surprise and said the company would not necessarily follow Duke's lead.

"We are not in any negotiations or in any discussions with the state on any type of settlement," said Richard Wheatley, spokesman for Reliant Energy. "We received the notice from the governor's office. But we are not sure we will send a representative."

A Williams spokeswoman confirmed the company also has been invited, but she said "it's unknown" whether someone from Williams will attend. A spokesman for Dynegy Inc. said the company received a call from the governor's office but is awaiting additional information.

The governor's staff did not respond to questions about the invitation extended to the generators.

Duke released the text of the so-called secret agreement Wednesday afternoon on its web site. The proposal involves a number of points, including a willingness to build new supply in the state; an offer to enter into long-term power contracts on reasonable terms including flexible credit terms; and a willingness to "share the financial pain on a fair basis with other market participants."

"We said more than a month ago that we would be willing to forgive a portion of the amount we are owed for the electricity we supplied, if credit issues are promptly resolved," Duke's plan states.

The plan calls upon the state to resolve all pending lawsuits and investigations into the company's pricing activities. The governors' office reportedly did not agree to stop investigations, and said it had no legal authority to do so anyway.

Duke along with other generators is owed billions of dollars in back payments by Pacific Gas & Electric Co. now operating under bankruptcy protection and near bankrupt Southern California Edison Co. The governor is trying to get legislation passed that would authorize the state to issue bonds to be paid off by ratepayers. Proceeds of the bond sale would allow the utilities to pay their debts and pay the California Department of Water Resources for power contracts arranged on behalf of the utilities.

Because the proposed $12 billion bond issue would be so large, the governor is trying to get the generators to take less than they are owed by the utilities. Davis has said on numerous occasions generators will have to accept less to help California out of its financial crisis.

Contact Ann de Rouffignac at annd@ogjonline.com

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