Governor accused of fuzzy math ENERGY: Davis defends his calculations, which don't include 'super-peak' consumption.

January 27, 2001

By KIMBERLY KINDY The Orange County Register

SACRAMENTO -- Gov. Gray Davis calculated the average price for electricity -- offered in bid proposals to the state this week -- by throwing out the most expensive prices offered during "super-peak" periods of energy consumption.

The decision infuriated some lawmakers, who on Friday said he deceived the public when he said the average was just 6.9 cents per kilowatt- hour - close to the 5.5 cents Davis said he needed to keep consumers' rates from going up again.

Davis and his new team of energy experts called emergency meetings with lawmakers Friday and were quick to publicly defend the decision. They said the number of "super- peak" periods are difficult to predict but would probably constitute no more than 10 days a year and inflate Davis' figures by fractions of a cent for per kilowatt-hour.

"The difference is minuscule ... even if you add super-peak power in, you are talking about a tenth of a point difference,'' Davis said at a Friday news conference.

"There was no deception,'' said Michael R. Peevey, who was hired this week by Davis to help the state negotiate energy contracts with power generators.

Assemblyman Tony Strickland, R-Thousand Oaks, said the state will be buying electricity in such large quantities that even a slight markup could add up to a significant amount of money.

Strickland and other Republicans also said that skepticism about Davis' positive characterizations of the bid process is being fueled by a lack of disclosure.

"We need the full disclosure on how much it's going to cost,'' Strickland said. "He can't leave anything out because when you are talking about a cent or a half-cent difference with these contracts, it could add up to millions of dollars.''

The "super-peak power" comes during times of extreme weather conditions that place an unusually high demand on the power grid, Peevey said.

Davis and other state leaders have said the state must step in to buy power for Californians to avoid blackouts. The cash- strapped utilities are having a difficult time purchasing power because of their poor credit.

The state plans to buy about one-third of all the electricity needs in California, and there is some support for California to create a public power authority.

On Wednesday, the state opened an Internet auction, calling for power generators to submit bids to sell it electricity. The state received 39 bids, and Peevey and other energy experts on Davis' team Monday will start negotiating with the power generators that made the best offers.

Although Davis said some contracts will be signed within the next two weeks, state Sen. Debra Bowen, D-Marina del Rey, indicated for the first time that others will be negotiated over an extended period of time to lock in the best possible rates.

"We don't want to push to a resolution of all those contracts right now because we know if we require the state to enter into all the contracts right now that we will pay top dollar,'' Bowen said.

Davis said he believes the average 6.9 cents per kilowatt could be negotiated down further -- he hopes to the 5.5 cents he was originally shooting for.

http://www.ocregister.com/politics/davis00127cci1.shtml

-- Martin Thompson (mthom1927@aol.com), January 27, 2001

Answers

Wartin,

There's more than fuzzy math involved here. 6.9 cents is close enough to 5.5 only for government work. It's 25+% higher. And let's see, now, the half cocked "deregulation" scheme conjured up by state politicians went somehing like this. Investor owned utilities (local power distributors)had to sell off their generating plants. They then had to buy power on the open market. They were prevented from doing this by long term contracts and had to buy through a centralized Power Exchange with everyone paying the same - and highest- price that day. There were no caps on the prices the utilities have to pay. However, regulators set the price utilities could charge their customers. Is this a recipe for disaster? In typical socialist fashion, the state creates a problem, blames the free market and then offers a plan for the state to run the operation, unencumbered by the rules which caused it. If this comes to pass, you can bet it will be 100% Marxist, half Karl and half Groucho> WRK

-- Warren Ketler (wrkttl@earthlink.net), January 27, 2001.