SDG&E Pulls Back from New Deals Despite Expanded Authority

Even in the wake of the summer's power crisis and emergency measures, San Diego Gas and Electric can't find any long-term power purchase deals to its liking, and, in fact, it has pulled back a request-for-proposal it had outstanding, soliciting longer-term, fixed price contracts.

"We have no bilateral deals and we are not considering any right now," said a spokesperson for the utility's holding company, San Diego-based Sempra Energy.

The California Public Utilities Commission last month on an expedited basis authorized SDG&E to ink bilateral power supply deals outside of the state wholesale spot electricity market (Cal-PX). In anticipation of CPUC action, SDG&E earlier had released a request for proposals.

When questioned about nearly two dozen deals that have been offered, Sempra's CEO Steve Baum in the media has said the five-year duration of the offers was too long, noting that the generators would like to get California utilities to panic and get locked into those deals, which in the later years are likely to be above-market.

Baum also has appeared to reject hedging in the Cal-PX block-forward markets, which the CPUC has authorized the utility do, noting that he thinks trading is not something utilities can do very well. The utilities' focus, Baum said, should be on delivering energy. (A Sempra energy trading subsidiary is doing quite well in recent quarters, but Baum pointed out, that part of the Sempra companies is prohibited from interfacing with the utility under the state's strict affiliate transaction rules.)

SDG&E is "hopeful" eventually of getting some attractive offers," the Sempra spokesperson said.

Under the CPUC authorization, the utility can now purchase power and ancillary services and various capacity products in the bilateral market. The deals must be "limited" in their volumes and must expire no later than Dec. 31, 2005, so they are limited to no longer than five-year deals. The CPUC was unclear on the volume limits, but if they correspond to those in effect for future-market hedging , SDG&E currently is limited to 1,900 MW in that regard.

Richard Nemec, Los Angeles

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