Power Prices Drop, But Relief For Consumers Not Expected (KFWB) -- KFWB Senior Correspondent Bob Jimenez reports that consumer rates will likely remain high despite recently-secured long-term contracts at lower wholesale prices.

The governor reports state negotiators have secured long-term contracts that will provide 43 percent of the state's anticipated power needs during the 16 hours of peak demand each day. In addition, conservation has helped lower wholesale prices of power, because demand has edged closer to the available supply.

But the prices consumers are charged for electricity are expected to remain high.

"It's more that it will stem volatility than it will lead to an immediate big drop in rates," said Steve Fetter, the managing director of the Global Power Group at the bond rating company Fitch Inc.

The reason for the discrepancy is that there's still much to pay for besides electricity itself -- mainly, money that has already been spent. The state has spent some $8 billion to buy power on behalf of utilities. The money will be paid back through bonds. But the bonds must be paid back as well, and it is ratepayers who will foot the bill.

In addition, prices are still volatile.

"There are factors that would lead to prices to maybe go up and down a little bit or maybe a lot," Fetter told KFWB.

The state continues to buy power. But due to recent price declines, the cost is apparently less than the $50 million a day the state had been spending for months.

Other debts must also be repaid. Lawmakers are working to restore financial health to the state's two largest utilities -- one of them has filed for bankruptcy and the other has warned that it is dangerously close to doing the same. The state will likely spend billions of dollars to help the utilities pay off debt.

-- PHO (owennos@bigfoot.com), June 08, 2001