Magazine article Insight on the News

Conflict of Interest Could Overturn California Electricity Contracts. (News Alert!)

Magazine article Insight on the News

Conflict of Interest Could Overturn California Electricity Contracts. (News Alert!)

Article excerpt

Remember California's electricity woes? Last spring Californians were worried about rolling blackouts and brownouts with the hot summer months still on the horizon. State utilities were declaring bankruptcy because of a "deregulation" scheme that only deregulated half the equation. Democrat Gov. Gray Davis was forced to raise a $13.4 billion bond issue and tried to keep the lights on by using state funds to purchase electricity on the spot-market, negotiating long-term contracts with wholesalers.

Davis finally allowed a slight rate hike to charge users who had their air conditioning roaring at peak times, and the energy crisis fizzled. Today, the California electricity grid is in good health, but Davis' political fortunes are not exactly sparkling. He's way down in some polls to political neophyte Bill Simon, the Republican nominee for governor.

Last May, Republicans in Sacramento charged that Davis was "day-trading in the electricity market" and operating under a "veil of secrecy" in negotiating these contracts (see "Californians Enter `In-the-Dark' Age," June 11, 2001). It turns out many of those contracts may not have been valid, so there's a lawsuit to void them. The United States Justice Foundation (USJF), a conservative public-interest law firm in California, has filed a lawsuit against the state Department of Water Resources, 30 energy providers and Vikram Budhraja, one of the chief consultants responsible for overseeing the $43 billion in contracts negotiated during the power crisis of 2001. …

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