Power makers fear bureaucratic static ELECTRICITY: They're unsure they'll be paid.

February 17, 2001

By JOHN HOWARD The Orange County Register

Power producers say Gov. Gray Davis' multibillion-dollar plan to resolve California's deepening electricity crisis could imperil the state's ability to purchase power over the long haul and place authority over critical transmission lines in the hands of a new, untrained bureaucracy.

Davis said earlier his proposal would reflect a consensus of political leaders, utilities and others. But he was alone Friday when he made the announcement -- a clear signal that political accord had not been reached, although Assembly Democrats said they liked the idea.

The Davis plan "will restore a measure of control to a system that is out of control," said Assembly Speaker Robert Hertzberg, D-Van Nuys.

Davis, after meetings with top executives of Southern California Edison and Pacific Gas and Electric Co., said Friday that California should acquire and operate some 27,000 miles of electricity transmission lines, in return for using state- backed bonds to finance the utilities' debt and assure power sellers, who already have mounting unpaid bills, of a stable, long-term market.

His proposal also would create conservation zones on the utilities' watersheds, allow the state to get the low-cost power the utilities generate for themselves and require the utilities' parent companies to help defray the utilities' red ink.

Davis said a final deal would not be reached until next week at the soonest, and he acknowledged that negotiations with the utilities, power generators and lawmakers would be tough. "This is like threading a needle," he said.

Generators, who are refusing to sell power to the credit- poor, cash-strapped utilities, were skeptical about the Davis plan. The companies said their bills continue to mount and that nothing in Davis' proposal protects their right to be paid.

"This is too little too late. We need details. We need assurances," said Gary Ackerman, acting executive director of the Western Power Trading Forum of Menlo Park, which represents power providers. "We believe that without those elements, we don't know how much good this is going to do," he said.

Power generators feared a "bloated bureaucracy would be in charge," Ackerman added.

Richard Wheatley, a spokesman for Texas-based Reliant Energy Inc., agreed.

"A new bureaucracy? The devil is in the details," he said. "There are problems, and all of us have fairly sizable accounts receivable. We have a lot of questions about future and current power, and how we are going to be reimbursed."

Reliant faces at least $2 million daily in unpaid electricity bills in California, and an energy producers' trade group said other companies are in a similar fix.

Currently, power providers don't have the state's promise they will be paid for the highest-priced, peak power.

"This is the real ax that people I represent have to grind," Ackerman said.

Davis acknowledged that his four-point proposal, anchored by the state's acquisition of the utilities' $3.1 billion transmission system, was far from complete and that even the companies it is intended to help -- the utilities -- had reservations.

"I'm not sure the utilities are in love with this idea," Davis said wryly.

Consumer advocates were also critical, although they generally favored the state's acquisition of a critical piece of the state's electricity system.

"The structure looks good to us, but will the structure be the basis of a fair deal or is it a fig leaf for a bailout? " said Nettie Hoge of the Utility Reform Network.

Republican criticism of Davis' handling of the crisis grew more pointed Friday.

Secretary of State Bill Jones, the state's ranking Republican officeholder and a political foe of Davis, offered his sharpest criticism to date of the governor's handling of the electricity crisis.

"The option presented today, 'socializing' the grid, if you will, is only one option. There should be a private-sector option, a private workout involving Wall Street and the utilities. The state should not be getting into the energy business, which is where we are rushing headlong."

Assembly Minority Leader Bill Campbell, R-Orange, said Davis' plan was premature and complained that the governor failed to consult GOP leaders.

Freshman Assemblyman Keith Richman, R-Sun Valley, floated his own proposal. Under Richman's plan, the two utilities would each be required to build one 500-megawatt power plant every year from 2003 to 2009 -- for a total of 7,000 megawatts.

The state would own 40 percent of these power plants until 2011, when the state would sell its share.

Richman said his proposal "helps provide a solution to the underlying problem of not enough power supply."

"The governor's proposal of purchasing the grid does nothing to answer the underlying problem," he said.

http://www.ocregister.com/politics/davis0s0217cci.shtml

-- Martin Thompson (mthom1927@aol.com), February 17, 2001