Calif. governor seizes Pacific Gas energy contracts Monday February 5, 8:31 PM EST SACRAMENTO, Calif., Feb 5 (Reuters) - California Gov. Gray Davis on Monday seized for the state lucrative, long-term energy contracts held by Pacific Gas & Electric that were about to be sold by the California Power Exchange, a creditor of the nearly bankrupt utility.

Davis' move comes three days after the Democrat took a similar action to block the power exchange from liquidating forward-market energy contracts held by cash-strapped utility Southern California Edison. The power exchange had sought to liquidate the contracts to recover hundreds of millions of dollars owed by the two utilities.

But the governor's office said the two orders were needed to "preserve" the contracts' value for consumers in the power-starved state hit by an energy crisis that has led to rolling blackouts and nearly bankrupted the two utilities.

"This will ensure that the price of power is a good deal less than it would be if it went out on the open market," Davis told a news conference. "Legislative leaders urged me to take this action and I took it."

The contracts, valued at hundreds of millions of dollars, deliver electricity at relatively inexpensive prices negotiated last year. These rates are far lower than on the chaotic spot market where the state's Department of Water is now paying an estimated $45 million a day in order to keep the lights on in the nation's most populous state.

A state court had issued a temporary restraining order blocking the exchange from selling the contracts to give Davis time to decide if the state would take them. Davis seized the contracts just before a Monday morning hearing on the restraining order.

Both Edison International's (EIX) Southern California Edison and PG&E Corp.'s (PCG) Pacific Gas & Electric are nearly bankrupt after racking up a combined $12 billion in debt buying power at high wholesale prices they are banned from passing on to consumers under the state's 1996 deregulation law.

That same deregulation legislation established the power exchange to buy and sell power for utilities. Southern California Edison and Pacific Gas & Electric were among the biggest buyers on the exchange.

Lawmakers are also racing to solve the power crisis roiling California. Last week Davis signed an estimated $10 billion energy rescue plan calling for the state to buy and sell power that its cash-strapped utilities can no longer afford.

Davis, under increasing pressure to solve the crisis, also said he would make public on Tuesday the first results of the state's efforts to buy long-term electricity contracts in a bid to stabilize the state's precarious power supply.

He added he would also unveil later this week a program to increase generation capacity. But he did not provide any specific details of the plan.

"I'm very grateful for the ability to enter into long-term contracts and as you'll see tomorrow, we have been successful at the beginning of that process," Davis told reporters.

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-- Martin Thompson (mthom1927@aol.com), February 06, 2001