California Effort to Buy Power Lines Proving Costly

Andrew LaMar , Contra Costa Times, Walnut Creek, Calif.

( June 29, 2001 )

Jun. 28--SACRAMENTO, Calif.--California will pay more than $10 million to private consultants assisting Gov. Gray Davis if the state reaches deals to buy power lines from three utilities, according to state records released Wednesday.

In addition, the state is paying $275,000 a month to the two firms, Saber Partners and the Blackstone Group, to advise the state on negotiating the agreements with Southern California Edison, San Diego Gas & Electric and the Pacific Gas & Electric Co., the records show.

The contract between the state and the firms, kept confidential by the Davis administration but made public Wednesday by State Controller Kathleen Connell, irked the governor's critics, who have assailed Davis for refusing to release information about the state's electricity purchases.

In a related development, a San Diego Superior Court ordered Davis to disclose the full versions of 38 long-term contracts the state has signed with generators for $43 billion of electricity. At the prompting of the court, the Davis administration released edited versions of the contracts two weeks ago, but the missing information made it difficult to assess the terms of the agreements.

"The governor wants to make as much information public as possible but he doesn't want to give the greedy energy companies a competitive advantage that will drive up electricity rates higher," said Steve Maviglio, the governor's spokesman. "We are reviewing the judge's decision and will make a decision shortly about a possible appeal."

Assemblyman Tony Strickland, R-Thousand Oaks, hailed the ruling. He filed one case on behalf of Assembly Republicans that was joined with another one brought by news organizations.

"The governor has tried to protect himself by concealing this information," Strickland said. "It is time for him to put the good of the state ahead of the good of his political career."

As for the contract with Saber and Blackstone, Maviglio said the governor is pleased to have the consultants' service at a cost far below the going rate on Wall Street. The contract says the two firms will get paid .0019 percent of the amount of the final deal with the utilities, a rate that is half what the firms normally get for such work, Maviglio said.

"The bottom line is: Is the governor looking for the best available talent for the lowest price?" Maviglio said. "You bet he is."

The two firms have provided a team of 15 financial experts to advise the state since March. Davis has endorsed buying the transmission lines and other assets of Edison and SDG&E for $3.76 billion, an amount that would net the consultants more than $7 million.

The paycheck for reaching a deal with PG&E, which owns the largest share of the 26,000 miles of high voltage lines crossing the state, would no doubt exceed $5 million.

However, in order for the consultants to get the incentives, the agreements would have to be approved by the Legislature. So far, Democrats and Republicans alike have panned the proposed agreements with Edison and SDG&E, and PG&E is in bankruptcy court, making it even tougher for the state to acquire its transmission lines.

The contract gives the advisers a financial incentive to push up the cost of the deals, creating a conflict of interest, said Jamie Fisfis, a spokesman for Assembly Republicans.

According to Maviglio, the consultants do not take part in negotiating the price and are not in the position to influence the cost of buying the lines. Fisfis disagreed.

"This looks mighty stupid and probably should be renegotiated," Fisfis said. "This puts the incentive in the wrong direction. It should be in favor of ratepayers, not utilities."

http://199.97.97.163/IMDS%PMAKRT0%read%/home/content/users/imds/feeds/knightridder/2001/06/29/krtbn/0000-0053-CC-POWER-LINE

-- Martin Thompson (mthom1927@aol.com), June 29, 2001