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Feb 16, 2004 - 11:50 AM

Will Arnold Pull the Plug on Sempra's Congestion Scheme

by Doug Heller
When Arnold said that he would not accept campaign contributions from businesses that have contracts with the state, it was to ensure that contracts met the needs of the public interest not the special interest. And when he promised to "explore options for renegotiating or otherwise reducing the cost of the $43 billion of overpriced electricity power purchase agreements that Gray Davis signed," it was because these contracts were so out of line with the public interest that something had to be done.

New information about how some power companies are using their state power contracts and the deregulated energy system to once again gouge California electricity ratepayers puts Arnold's promises into a new light. One of the firms involved in the newly identified scheme, Sempra, recently donated $50,000 to Governor Schwarzenegger's California Recovery Team.

Two years after Enron and other power companies' market manipulations were exposed, there is now information that Sempra and Intergen (a joint venture of Shell and Bechtel) are playing games with the California energy system at a cost to consumers of millions of dollars per month. The companies appear to be intentionally clogging a weak transmission line at the California-Mexico border in order to be paid not to produce power. The state's electricity transmission operator, known as the ISO, pays Sempra and Intergen for turning off the juice that they are supposed to provide to the state as part of long-term energy contracts signed during the energy crisis. Then the ISO buys the needed power from another, less congested point on the grid. And consumers pay for it all.

This congestion game continues because there still is insufficient government oversight of the power system. It is an expensive reminder that the legacy of deregulation remains. While state and federal lawmakers should develop plans to re-regulate the electricity system, some short term fixes are in order:
  • The ISO ought to refuse to pay for the congestion manufactured by the power companies.
  • Federal regulators should toss out the firms' licenses to sell unregulated power.
  • Most importantly, Schwarzenegger should immediately shred the energy contracts that facilitate these schemes and seek compensation and penalties for the money that has been stolen from Californian consumers.

But to do that, Arnold will have to look Sempra executives in the eyes and say: "Hasta la vista, donor."

Read more about the new energy schemes in the San Diego Union Tribune.

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