This excerpt taken from the PCG 8-K filed Oct 28, 2005.
California Department of Water Resources Contracts
Electricity from the DWR allocated contracts provided approximately 28% of the electricity delivered to the Utilitys customers for the three-month period ended March 31, 2005. The DWR purchased the electricity under contracts with various generators. The Utility is responsible for administration and dispatch of the DWRs electricity procurement contracts allocated to the Utility for purposes of meeting a portion of the Utilitys net open position, which is the portion of the demand of a utilitys customers, plus applicable reserve margins, not satisfied from that utilitys own generation facilities and existing electricity contracts. The DWR remains legally and financially responsible for its electricity procurement contracts.
The current DWR contracts terminate at various times through 2012, and consist of must-take and capacity charge contracts. Under must-take contracts, the DWR must take and pay for electricity generated by the applicable generating facilities regardless of whether the electricity is needed. Under capacity charge contracts, the DWR must pay a capacity charge but is not required to purchase electricity unless that electricity is dispatched and delivered. In the Utilitys proposed long-term integrated energy resource plan filed with the CPUC in July 2004 and approved in December 2004, the Utility has not assumed that the DWR contracts will be renewed beyond their current expiration dates.
The DWR has stated publicly that it intends to transfer full legal title to, and responsibility for, the DWR power purchase contracts to the California investor-owned electric utilities as soon as possible. However, the DWR power purchase contracts cannot be transferred to the Utility without the consent of the CPUC. The Settlement Agreement provides that the CPUC will not require the Utility to accept an assignment of, or to assume legal or financial responsibility for, the DWR power purchase contracts unless each of the following conditions has been met: