San Fran Chron Tuesday, June 19, 2001

In public copies of the contracts, thick black lines obscure such essential information as whether generators are required to provide electricity when a plant or transmission line breaks down, which plants will supply power, and where and how power will be delivered.

Information about determining natural gas costs, which are tied to prices being paid for about half the electricity, also was censored.

"Unless you can see the full contract, it's really not possible to tell whether the state made a good purchase or not," said Severin Borenstein, director of the University of California Energy Institute.

Gov. Gray Davis maintains that revealing the missing information "would leave the state vulnerable to paying higher prices," said Steve Maviglio, the governor's spokesman.

But consumer advocates, journalists and some lawmakers said the public's right to know how $39 billion of state money was spent should take precedence.

"The meat is missing -- all the nitty gritties that determine, A, the price and, B, what the marketers are using as strategic advantage," said Nettie Hoge, executive director of The Utility Reform Network in San Francisco.

"We definitely believe that the redactions are inappropriate," said Los Angeles attorney Alonzo Wickers IV. "They keep from the public information that's essential to understand what the real costs and risks of these contracts are."

Wickers' firm represents nine news organizations, including The Chronicle, in a suit to force the contracts to be made public.

San Diego Superior Court Judge Linda Quinn last week ordered the state to release the contracts, but temporarily agreed that Davis could withhold certain details, which his lawyers described as trade secrets and other proprietary information.

Quinn will hold another hearing next Wednesday, June 27, to decide whether the redacted material should be disclosed and whether the state's spot-market electricity contracts should also be released, against Davis' wishes.

The Department of Water Resources, which negotiated the contracts, declined to comment about the redacted material until it files a brief in the disclosure case on Friday.

MISSING INFORMATION

"We shouldn't have an information blackout," said Assembly member Tony Strickland, R-Thousand Oaks, who is spearheading a related suit by 10 Republican state legislators to compel full disclosure.

"The irony is that (state legislators) are being asked to vote for things blindfolded," said Sacramento attorney Charles Bell, who represents the Republican lawmakers.

The specific information that is missing falls into three categories:

-- Natural gas. For about half the wattage, the contracts tie electricity prices to the cost of natural gas, which can fluctuate dramatically. The public contracts removed references to what indexes will determine the gas costs, how much gas specific plants use and which pipelines will ship the gas.

The gas indexes could open up a loophole for generators, experts said. The contracts do not reveal whether generators will have to prove their actual costs or use a common market index, such as the border price for natural gas in either Southern or Northern California -- two numbers that can diverge significantly.

Borenstein said he was puzzled that how much gas plants use was not divulged. "That is pretty well known," he said. "Every plants over 50 megawatts has to report very detailed data on its operations, including run rate."

-- Transmission costs and risk allocation. The contracts censored references to what would happen if a bottleneck or breakdown prevents transmission of electricity. Without knowing that, it's difficult to gauge how reliable the power supply will be.

"I would be unhappy to hear that these are not firm contracts," said Borenstein. "I would hope that most of these are firm contracts that say you have to deliver this power, and if your generator isn't producing, we don't want to hear about it."

-- Energy delivery points. The public contracts remove all references to what plants will provide power, where they will deliver it and what delivery system they will use.

'SOMETHING STRANGE GOING ON'

"There's something strange going on there with location," said Roger Bohn, a management professor at the University of California at San Diego and former adviser to the California Power Exchange. "It may have something to do with Northern and Southern California. One part of the state could have a much tougher set of prices than the other and rely more on the spot market. But you can't tell."

Wickers, the media lawyer, said he found some holes in Davis' arguments. On the one hand, the electricity suppliers have also said they do not want specific information divulged, he said. On the other hand, Davis claims that divulging that information would allow suppliers to take advantage of the state in negotiations. "If, in the fact, the disclosure of these terms will prejudice the state, the suppliers would be happy to have them disclosed," he said.

Hogue also noted the contradictions in Davis' siding with the same power generators he frequently reviles as profiteers.

"It seems like we're protecting the very pattern of conduct that we're simultaneously (doing) criminal investigations to try to get to the bottom of," she said.

Borenstein said that the governor might or might not have a valid argument. "In general, we want public officials doing stuff in the sunshine, but we do make exceptions," he said. "It's a tough issue."

-- Anonymous, June 19, 2001