REPORT: California's long-term energy contracts could mean costly power surplus for years

Saturday, August 11th 2001, 12:00 am
By: News On 6

LOS ANGELES (AP) _ California may have a costly glut of electricity through 2004 because of the long-term power contracts it signed to end the current crunch, the Los Angeles Times reported Saturday.

Predicting rising demand, California signed long-term contracts earlier this year with private energy suppliers to buy power at fixed prices.

But last month, the state lost $46 million when cool weather reduced electrical demand and prompted officials to sell power bought at high prices for a loss. If current rates continue, the state could lose $500 million in the next year alone by selling off surplus electricity at a loss, according to a Times analysis.

The newspaper reviewed the state's power purchases and projections over the next several years but noted that weather, the economy and other factors could change the supply-and-demand balance.

Looking forward to 2004, the state has contracts to purchase 43 percent of the electricity required by California's three large private utilities. But if current trends hold, the utilities will need only about 35 percent, the Times analysis said.

In addition, a power plant building boom will add additional power in the next few years, and rate hikes are likely to increase consumers' energy conservation.

S. David Freeman, chief architect of Gov. Gray Davis's energy policy, defended the state's efforts, saying the purchase of a ``healthy surplus'' was necessary and will guard against future blackouts.

``This is a very small cost compared to what a blackout does to the economy,'' he said.