Davis' Right To Stay Mum On Contracts Doubted

Attorneys say law favors disclosure David Lazarus, Chronicle Staff Writer Thursday, March 8, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/08/MN34021.DTL

Gov. Gray Davis has no legal right to keep details of California's long- term power contracts a secret, lawyers specializing in public records said yesterday.

Davis has argued that, even though he is spending about $40 billion in public funds, he cannot reveal specific terms of the state's deals with energy companies because of secrecy clauses in each agreement.

However, attorneys said, state law supersedes such clauses, and the law clearly favors disclosure of any contract signed by a public agency.

"The governor can't circumvent the Public Records Act with confidentiality agreements," said James Chadwick, a partner with the Palo Alto firm of Gray, Cary, Ware & Freidenrich. "Once these contracts are entered into, they become public records."

Davis announced Monday that 40 contracts for about a third of California's current energy needs had been reached for the next decade.

Declining to comment on terms of individual accords, the governor said only that the average price of each contract was $69 per megawatt hour -- well above the $30 to $40 charged by power companies before California energy prices soared last summer.

He said the various contracts ranged in length from four months to 20 years.

Davis did not say:

-- How much of the nearly 9,000 megawatts of contracted power falls into shorter-term agreements, which would be subject to future renegotiation, and how much is accounted for in longer-term pacts.

-- The ratio between short- and long-term contracts in determining the $69 average price.

-- Whether any loopholes exist for contract prices to be renegotiated if market conditions significantly change.

While knowing this would not affect current contracts, it could influence upcoming accords. It also would indicate how well state negotiators handled taxpayers' money -- and whether consumers might be hit with higher rates in the future.

"Private companies might be used to confidentiality agreements," said Stephen Johanson of the Sacramento firm Johanson & Associates. "But it's a different situation if they're dealing with a public agency. Public contracts are subject to disclosure."

In fact, the Public Records Act does contain exemptions that would allow such documents to avoid public scrutiny. If, for example, it can be proved that a company's trade secrets would be revealed, a contract could remain under lock and key.

RATE TERMS 'NOT A SECRET' But lawyers said it would be difficult to argue that the price and duration of an electricity sale could be considered a trade secret.

"What the state is paying for energy -- that's not a secret," said Chadwick of Gray, Cary. "You would have a very tough time making that argument for a rate in a long-term power contract."

Attorneys said that if no other exemption to the Public Records Act could be found, the fallback was a "catchall" stipulation regarding protection of "public interest."

This is precisely the exemption -- Section 6255 of the Government Code -- cited yesterday by Steve Maviglio, a spokesman for the governor, in defending why terms of the contracts should remain a secret.

"If we reveal the information, we would be at a competitive disadvantage in negotiating other contracts," he said.

Section 6255 states that information can be withheld when "the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure of the record."

BRIEF EXEMPTION POSSIBLE Neil Shapiro, a partner with the San Francisco firm of McCutchen, Doyle, Brown & Enersen, said this exemption might indeed be applicable during brief periods of negotiation but not long afterward.

He said the exemption should apply for no more than 60 days after a contract is signed.

"The critical elements of the contract -- price and duration -- should not remain confidential as the market changes," he said. "This is a vibrant and volatile market."

Shapiro has represented The Chronicle in past public-records cases.

"If you're committing $40 billion of my dollars, I damn well have a right to know how it's being spent," he said.

This is how things are done elsewhere. In Pennsylvania, which deregulated its electricity market at the same time as California, the state Department of General Services spends about $30 million a year buying power for public buildings, schools, prisons and hospitals.

"Once a contract is signed, it becomes a public record," said Samantha Elliott, a spokeswoman for the department. "Anyone could see it."

Longer term, Maviglio, the governor's spokesman, said the state believed the Public Records Act would allow the contracts to remain secret for years to come.

E-mail David Lazarus at dlazarus@sfchronicle.com.

-- Martin Thompson (mthom1927@aol.com), March 08, 2001