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Calif. signs energy deals
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March 5, 2001: 6:31 p.m. ET
Long-term contracts with generators to fill some electric needs at lower cost
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NEW YORK (CNNfn) - California Gov. Gray Davis announced Monday that the state has signed 40 long-term electricity-supply contracts with 20 power generators in an attempt to help stem the state's energy crisis.
The contracts will yield an average 8,886 megawatts of power, enough to provide power to nine million homes, over the next 10 years, at an average cost of $79 per megawatt hour (MWh) for the first five years.
That's far below the $300 per MWh currently being paid in the spot wholesale power market by California's utilities, which have been pushed towards possible bankruptcy by the gap between uncontrolled wholesale prices and regulated retail rates.
 A megawatt hour, the standard unit for pricing power, equals one megawatt of energy delivered for 60 minutes. A megawatt could light 10,000 100-watt light bulbs.
The average price of the contracts drops further to $61 for the next five years, Davis told a news conference in Los Angeles Monday. Further financial details of the contracts were not disclosed.
Among the companies that signed contracts were Calpine Corp. (CPN: Research, Estimates), Duke Energy Corp. (DUK: Research, Estimates), Dynegy Inc. (DYN: Research, Estimates), Enron Corp. (ENE: Research, Estimates), Reliant Energy Inc. (REI: Research, Estimates), and Williams Companies (WMB: Research, Estimates).
The contracts are of varying lengths -- from four months to 10 years, with one contract for 20 years. A total of more than 629 million MWh is under contract under the agreements.
"These agreements are the bedrock of a long-term energy solution," said a statement from Davis. "They provide reliability at a reasonable price. With these deals in place, California's energy future is looking a whole lot brighter."
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Davis' statement said the negotiations for contracts will result in expediting construction of new power plants. Some 5,000 MW is slated to come on line within the next two years, including some as early as this summer, according to his statement.
While details of the contracts were not released by David, Duke Energy said earlier in the day that its contract promises deliveries totaling 550 megawatts beginning Jan. 1, 2002, increasing to 800 MW on Jan. 1, 2003, and lasting through Dec. 31, 2010.
The contracts amount to 75 percent of the long-term deals the Davis administration has sought under a new law that lets the state spend an estimated $10 billion over a decade to buy power for Edison and PG&E customers, according to the Sacramento Bee.
Davis has pitched such contracts as one way to lift California out of its energy crisis, reported the Bee. Negotiations have taken longer than expected, however, as his administration and power providers haggled over how much the state should pay.
The energy crisis has pushed Southern California Edison, a unit of Edison International (EIX: Research, Estimates) and PG&E Corp. (PCG: Research, Estimates) to the edge of bankruptcy. Both companies have missed debt payments as they struggled with mounting losses.
-- Reuters contributed to this report. 
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