Once the holder of one of the largest electricity supply deals with California, Allegheny Energy Supply said last week it has filed claims with the state’s Board of Control for what it alleges are “monetary damages” inflicted on it by the state’s “bad-faith actions” abrogating a long-term supply deal. State actions, which still have not terminated the deal, nevertheless have caused the company “significant negative financial” problems, Allegheny said.

Under California law, the filing to the control board is required before contract, or tort-based, legal action can be taken against the state or any of its agencies, and Allegheny noted that no court claims have been made yet. The company took the latest action to “preserve its legal rights going forward,” according to Michael Morrell, president of Allegheny Energy Supply.

Ongoing efforts led by the state governor’s office to abrogate the contract between the Department of Water Resources and Allegheny is the principal reason for the filing, the company said. In its filing, Allegheny cited “multiple wrongful acts on the part of California agencies and their advisors that have damaged the company.

“California is not above the law and is not exempt from paying for the harm it wrongfully causes,” Morrell said. “Its bad-faith actions appear to be designed to create financial instability at the company, a condition California then planned to use to walk away from a valid contract.”

What Allegheny calls an “orchestrated campaign to escape its contractual obligations” is at the crutch of the dispute, which the company said has picked up since late 2001 when wholesale energy prices continued to decline.

“California has taken repeated steps to prolong the uncertainty surrounding the Allegheny-California contract by first filing a complaint against Allegheny Energy Supply with the Federal Energy Regulatory Commission and, more recently, filing a lawsuit in Sacramento Superior Court,” the company said in a prepared statement. “The uncertainty surrounding the contract has had significant negative financial consequences for Allegheny.”

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