California May End Up With Too Much Power, Paper Says

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The long-term contracts California signed earlier this year to end its power crisis could result in a costly power surplus through 2004, the Los Angeles Times reported Saturday.

Faced with an energy shortage, the state signed deals with energy suppliers that could be worth up to $40 billion dollars in the next decade. Cool weather last month reduced electrical demand, however, and California sold power at a loss of $46 million.

At that rate, the state could lose $500 million in the next year alone. Whether or not that will happen depends on factors that could change the supply-and-demand balance, including the weather and the economy — two systems that defy forecasting.

"This is a very small cost compared to what a blackout does to the economy," S. David Freeman, chief architect of Gov. Gray Davis's energy policy, said.

The 75-year-old Freeman, the former head of the Los Angeles Department of Water and Power, is expected to be named the chair of a new state power agency by Gov. Gray Davis on Monday.

The California Consumer Power and Conservation Financing Authority, created by a bill that takes effect Monday, will be able to raise as much as $5 billion through the sale of bonds to build power plants and encourage conservation.

"Ten years from now, if we don't put together what we are putting together, we'll be back in the soup again," Freeman said last month.

Looking forward to 2004, the state has contracts to purchase 43 percent of the electricity required by California's three large private utilities. If current trends hold, the utilities will need only about 35 percent, the Times analysis said.

In addition, a power plant building boom will add additional power in the next few years, and rate hikes are likely to increase consumers' energy conservation.

The Associated Press contributed to this report.