Governor Signs Bill Putting State Into Power Business

(AP) --

California will no longer be held captive by energy suppliers charging high prices for power, Gov. Gray Davis said Wednesday as he officially put California into the electricity wholesale business.

By signing a bill by Senate Leader John Burton, Davis created the California Consumer Power and Conservation Financing Authority -- a new state agency that can issue up to $5 billion in revenue bonds to build, purchase, lease or operate power plants.

Plants financed by the authority will provide cost-based electricity to California consumers, Davis said, which will help stabilize the state's volatile energy market.

The power authority is modeled after one in New York, which has 10 power plants, 1,400 miles of transmission lines and produces about 25 percent of the state's power. Nebraska also has a power authority, which created a market in which residents pay 22 percent less than the national average, Burton said.

An increase in the number of power plant down for repairs this year "is strong evidence that people are manipulating the market by withholding power to drive up prices," Davis said.

"The only way we can fight back against this type of price gouging and manipulation is to build more plants," he said at the bill signing ceremony in front of a Sacramento Municipal Utility District power plant. Having a public power authority will "supplement not supplant" private energy sources, Davis said.

"In a deregulated world, the only way you can guarantee reliable affordable power is to build it yourself if private companies won't do it," he said.

The bill gives the power authority the power of eminent domain, but Burton, D-San Francisco, said if the state were to seize any power plants he would prefer that it would be by using the governor's emergency power, because that process is quicker.

"Sooner or later the state has got to let these buccaneers know that we're not going to tolerate what they're doing to us," Burton said. "The only thing these exploiters understand is possibly a little counterterrorism."

Few Republicans in the Legislature supported the bill, saying the state shouldn't get further into the power business. They also warned that it could discourage private companies from building plants.

The bill was sponsored by state treasurer Philip Angelides, who conceded that it won't save California from blackouts this summer but will help stabilize the energy markets as more generators are built.

"This legislation will help ensure that California is never again held hostage by an unregulated private energy market run amok," Angelides said at a news conference in Los Angeles before speaking at a Town Hall event.

The treasurer said the bill is the "beginning of the end for deregulation ... which has proven to be a disaster." He repeatedly blamed the crisis on out-of-state power generators.

"There is a tremendous drain on California because of generators' prices," he said. "And that drain is heading straight to the heart of Texas."

Other key lawmakers urged Davis Wednesday to join with the governors of Washington and Oregon to set a limit on the price the states would pay for power this summer, creating a "buyers' cartel."

The states should set their own price ceiling on electricity in light of federal regulators' refusal to set region-wide caps, said Fred Keeley, D-Boulder Creek, the Assembly's point man on energy. The states would refuse to pay, under any circumstances, more than a predetermined price that would give electricity generators a "reasonable" profit, under a resolution sponsored by the nine Democrats.

If generators refused to lower their prices, that would mean almost certain blackouts in California this summer, said Assemblyman Paul Koretz, D-West Hollywood, the measure's author. But those will happen anyway, by all accounts, and the price cap would let the state better predict and manage the outages, he said.

The resolution proposes that caps be installed for two years, until enough power plants can be built to allow the market to function naturally.

The state has been buying power for the customers of three major utilities since mid-January. The utilities' credit was cut off after they amassed debts of more than $14 billion dollars due to high wholesale electricity prices that they were unable to pass on to customers.

-- PHO (owennos@bigfoot.com), May 17, 2001