Depending on your perspective, California either moved towardfuture solutions to its nagging energy crisis or took several stepsbackward yesterday with the launch of its electricity bulk buyingprogram for long-term, fixed-price supplies.

The auction began yesterday and will run through noon today. Thestate is seeking sealed bids for six-month, three-year, five-yearand 10-year supply agreements. Whether results of the auction wouldbe made public was still unclear yesterday, but the results areexpected to be given to legislators, who now are debating variouslong-term solutions in the state senate.

A spokesperson in the state Assembly Speaker’s office said thelegislature is basically “standing by,” awaiting more priceinformation. Action on the proposed comprehensive legislation,including the question of the state taking over the privateutilities’ hydroelectric systems, should come by the end of theweek.

Merrill Lynch said yesterday it was “increasingly skeptical”that the “securitization for hydro” plan would go forward. It hasreceived “muted support,” Merrill Lynch said, and has not beendrafted as a bill yet. Recent revisions of the comprehensive billshow some progress on contract flexibility, with the possibilitythat the value of the entire portfolio of energy contracts might becapped at a weighted average price of $55/MWh, which is well belowthe utilities retail rate caps (Edison at $72.40/MWh and PG&Eat $66). The difference is expected to be used to pay down theutilities’ debt.

Meanwhile, the electric system limped along under the specter ofanother Stage Three yesterday, but without rolling blackouts, andelsewhere indications outside the state were that some energymarketers have written off California from their prospectivemarketing lists.

“We’re not selling in California any more, a person could getfired for doing that around here,” said one Texas-based gasmarketer, referring to the continuing credit problems of PacificGas and Electric Co., which has been hobbled by the weight of itswholesale electricity debts on the natural gas side, too.

In the meantime, Southern California Edison Co. is back infederal district court in Los Angeles, where it obtained afavorable initial ruling two weeks ago. This time it is asking forthe court to force the California Public Utilities Commission toallow it to raise its rates to cover the wholesale cost of power.

Calling the action with the court “a last resort,” Edison saidit has tried to get the rate situation resolved, but at every turnit has met “resistance, denial and finger-pointing” by the CPUC’sfive-member governor-appointed board.

The CPUC on Tuesday acted to anticipate new state legislationregarding the hydroelectric systems in the state by cancelinghearings it had scheduled this week and next to go exclusively towritten comments for the environmental review of the ongoing caselooking at PG&E’s hydro utility assets. “The current energycrisis in the state makes it prudent for the commission to shiftfrom public hearings to written testimony,” the CPUC said in aprepared statement.

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