Sempra confirms Gov. Davis wants to meet on contracts

Sempra Energy Resources is willing to discuss terms of its power supply contracts with California Gov. Gray Davis, “but any contractual modifications must be mutually agreeable and beneficial,” Pres. Michael Niggli said Tuesday.

The wholesale generation subsidiary of Sempra Energy confirmed it has been asked by the governor’s office to a meeting to discuss long-term power contracts between the state the company. The state reportedly has been contacting suppliers to renegotiate terms of agreements signed on the heels of spring blackouts and projections of continued electricity shortages.

But with power prices and demand falling, the governor, who has filed for reelection, has come under increasing criticism from lawmakers and consumer groups for signing deal that commit ratepayers to pay high prices for electricity well into the future.

Obtaining permanent financing for the power purchases has also proved a major headache. Davis planned to issue bonds to recoup general fund outlays for electricity, but the plan have run into several snags. The state began buying power after two of the largest utilities defaulted on wholesale power purchases.

Sempra Energy Resources entered into a 10-year supply agreement with the California Department of Water Resources (DWR) in May 2001. The contract, which began in June 2001 and runs through September 2011, will supply up to 1,900 Mw of electricity to the state during peak periods. At the time the agreement was reported, Sempra said the contract could be worth up to $7 billion.

Niggli said the company doesn’t know what terms, if any, the governor’s office may want to discuss, but added its contract with the state “is fully enforceable.”

Sempra is willing to listen to what the governor’s office has to say, Niggli said, but he added, “We already have begun fulfilling our obligations under this contract by delivering energy this past summer at a substantial discount.”

The majority of the power under the contract is coming from company’s new fleet of combined-cycle gas-fired generating facilities that are either currently operating or scheduled for completion within the next 2 years.

Sempra is spending $2 billion to build 3,000 Mw of new generation in the western region, including power plants in Bakersfield and Escondido, Calif.; Buckeye, Ariz.; Boulder City, Nev.; and Mexicali, Baja California.

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