Calif. Gov. to Push Plan to Buy Power
Jan 14 7:17pm ET
By Nigel Hunt
LOS ANGELES (Reuters) - California Gov. Gray Davis will
talk with California lawmakers over the next couple of
days to push a plan under which the state would buy
power for its near bankrupt utilities, his spokesman said
on Sunday.
The proposal involves the state signing long-term
contracts with power producers which would then be
resold at cost to the California's two largest utilities,
Southern California Edison and Pacific Gas and Electric.
California is in the midst of a power crisis with a chronic
shortage of supply threatening to plunge the country's
most populous state into darkness. The supply crunch
has helped to send wholesale prices to record levels.
San Francisco-based Pacific Gas and Electric and
Southern California Edison, which is based in the Los
Angeles' suburb of Rosemead, have run up billions of
dollars of debt this year because they have not been
allowed to pass on skyrocketing wholesale power
costs due to a rate freeze imposed under the state's
much-criticized power deregulation program.
The burden has driven them to the brink of bankruptcy.
Neither utility would comment on Sunday, saying they
needed more time to study Davis' proposal.
Last week the lights nearly went out in 2 million homes
with the two utilities credit problems contributing to a
desperate shortage of electricity.
Blackout were averted only when a solvent state
agency -- the California Department of Water
Resources -- stepped in to buy power on behalf of the
utilities.
Davis wants the state legislature to approve setting up
a fund to buy and sell electricity for the utilities. His
spokesman, Steve Maviglio, noted that the CDWR did
not have sufficient money to finance deals indefinitely.
"There is not an unlimited till (at the CDWR)," he said.
Southern California Edison is a unit of Edison
International while Pacific Gas and Electric is a
subsidiary of PG&E Corp. . They serve a total of about
24 million of the state's 34 million residents.
A leading consumer group reacted with caution to the
plan, demanding that any deal should include provisions
preventing the utilities from collecting previously
incurred costs.
A statement issued by the Foundation for Taxpayer and
Consumer Right said the deal could force California
ratepayers to spend an extra $10 billion to bail out the
two utilities from the effects of deregulation.
FTCR wanted the state legislature to ensure the two
utilities cannot collect excess charges from customers
to help pay down the billions of dollars of debt they
have already incurred, limiting any recovery to future
costs.
Clinton administration officials on Saturday ended a
marathon negotiating session saying it was up to
California lawmakers and the governor to finalize a plan
by Tuesday to stave off bankruptcy for the utilities.
Gene Sperling, director of the president's National
Economic Council, made it clear that the ball was now in
the court of Gov. Davis and state lawmakers. They
must hammer out a solution to the state's chronic
power woes over the next two days before Wall Street
reopens on Tuesday.
"The governor laid out a framework for him and the
legislative leadership to work on," Sperling told
reporters after a meeting with state officials and
industry executives. "The issue is now for them to work
out the proposal."
Tuesday is considered crucial because that is when Wall
Street traders and analysts return to work after a
three-day U.S. holiday weekend. Financial markets have
been anxiously watching the negotiations to evaluate
the bankruptcy threat to PG&E and Edison.
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