Power bloc blasts seizure idea

Producers say talk of bold action fuels crisis

By Steve Geissinger SACRAMENTO BUREAU

SACRAMENTO -- Outraged by a report in The Oakland Tribune that some lawmakers asked the governor to seize high-priced power contracts, a key industry group Tuesday warned the Davis administration and Legislature that such action would worsen the energy crisis.

"We're publicly saying . . . this kind of rhetoric will have dire consequences on both the reliability and cost of power in California for years to come," said Jan Smutny-Jones, executive director of the Independent Energy Producers Association.

"It is the kind of rhetoric one would expect in Indonesia or the Philippines, not the sixth largest economy on the planet," he said in a teleconference.

At the same time, Davis administration officials confirmed that seizing contracts of allegedly profiteering brokers is the most likely last-ditch move if options continue to narrow, ahead of the previously discussed concepts of seizing California power plants owned by out-of-state firms or passing a windfall profits tax.

Davis spokesman Steve Maviglio pointed out the governor already seized power contracts on which California's investor-owned utilities were defaulting in early February.

The state, trying to buy its way out of the energy crisis with no clear end in sight, lost a substantial measure of control over electricity prices and supplies to the courts with the recent bankruptcy filing by the Pacific Gas and Electric Co.

Gov. Gray Davis, a Democrat, employed hard-sell tactics Tuesday in an effort to convince reluctant Democrats that their failure to embrace his plan to financially rescue teetering Southern California Edison could plunge that utility into bankruptcy, as well.

While most Republicans are flatly opposed to the plan as misguided, Democrats, who hold a majority in the Legislature, worry it's a public bailout of an investor-owned utility and would hand the state control over only Edison's south-state piece of the strategic high-voltage transmission grid in California.

Soaring wholesale power costs have financially shattered utilities, forcing the state into runaway, multibillion-dollar spending that helps keep the lights on but threatens the state budget. The manager of the state's power grid has accused generators and marketers of overcharging Californians more than $6 billion in recent months.

Assembly Speaker Robert Hertzberg, D-Van Nuys, said Monday that members of both legislative houses were interested in seizure of California power plants' contracts with brokers, who sell to customers within or outside the state.

Sen. Don Perata, D-Oakland, an outspoken critic of the Davis administration's handling of the crisis, said some lawmakers had asked the governor to use emergency or eminent domain powers to seize the overpriced contracts and were awaiting Davis' answer this week.

Supporters of the move said seizure would allow the state to control where the power is sold and decrease price markups by eliminating the middleman.

But myriad questions remain unanswered, including regulatory and interstate commerce issues as well as any state reimbursement of the brokers.

Any move to seize power contracts would be overturned by the courts, said Gary Ackerman, executive director of the Western Power Trading Forum.

"Instead of trying to do what's legally within their reach, they go to extreme measures that are on their very face unlawful and unconstitutional," Ackerman said.

Moreover, industry officials said, seizure would not only chill industry investment in California's power system and lead to higher power costs but would be ironic since California has shunned lower-cost, long-term contracts, industry officials said.

"It would create a very unstable political, regulatory environment," Smutny-Jones said. "It would have extremely adverse consequences for California in the long term."

Even so, the talk has worried the industry.

Smutny-Jones said his clients are "very, very troubled by this sudden turn in rhetoric."

"I assume when senior members of the Legislature make pronouncements about potentially seizing contracts, it's designed to get our attention and we obviously take those things seriously," he said.

The Independent Energy Producers group is "in the process" of contacting the Davis administration and lawmakers, said Smutny-Jones. "You'll hear more about this."

http://www.oaklandtribune.com/S-ASP-Bin/Ref/Index.ASP?puid=490&spuid=490&Indx=803268&Article=ON&id=52018142&ro=18#

-- Martin Thompson (mthom1927@aol.com), April 18, 2001