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Calif Energy Policy Driving Away New Pwr Plants -Official

Updated: Tuesday, May 22, 2001 07:37 PM ET LA JOLLA, Calif. (Dow Jones)-California's moves to address its electricity crisis are creating regulatory uncertainty that is deterring needed investment in new power plants, a commissioner with the California Energy Commission said Tuesday.

"If you are a generator, you would be inclined to look in the 49 other states to invest," Republican Commissioner Robert Laurie said at an energy conference.

The commission is the state's primary energy policy and planning agency, and is responsible for licensing all power plants that produce more than 50 megawatts of power.

The creation of a public power authority will result in the loss of some of the 10,300 megawatts of generation approved by the commission during the past two years, because developers won't be willing to compete with the state, Laurie said. And political rhetoric aimed at out-of-state suppliers by Democratic Gov. Gray Davis and his administration will add to the regulatory uncertainty and further deter investment, he said.

"Discouragement of private generation. That's what I hear," Laurie said.

The governor's office said Laurie's claims were unsupported.

"The numbers speak for themselves," Davis spokesman Steve Maviglio said. "More power plants are being built in California now than in generations...The fact remains that no major plants were built during the 12 years before Governor Davis took office, and no amount of Republican spin can change that."

Power Costs Seen High For A Decade

Higher power rates will cost California investment as well, Laurie said. Not only did state regulators dole out the bulk of the recent rate hike to business, he said, but long-term power contracts signed by the state will "guarantee California pays the highest price for electricity for at least the next decade."

"Deregulation was intended to keep businesses here by reducing their electricity costs," Laurie said. "It's ironic that the rate increase the PUC ordered last week will place most of the burden on large businesses."

Laurie encouraged Latin American countries to avoid using California's restructuring plan as a model for deregulation.

"I urge those of you thinking about deregulation not to use California as an example," Laurie said.

California had plenty of time to respond to the alarms that an energy crisis was developing, but the state never acted, he said.

Economists working with the state's power-market operators and monitors warned as early as 1998, when deregulation was still in its infancy, that problems were brewing, he said.

"The system failed because government failed," he said. "And when the alarm bells rang, no one answered the call."

Laurie said he has no evidence that generators have manipulated the market or acted illegally to boost their profit margin or to create shortages in the state, despite allegations made by lawmakers and the state's Public Utilities Commission.

"My belief at this point is (generators) would operated within the rules," he said. "The cause of the supply problem is debatable, depending on who is doing the talking." .

-By Jason Leopold, Dow Jones Newswires; 310-666-9986; jason.leopold@dowjones.com

http://quicken.excite.com/investments/news_center/article/printer.dcg?story=/news/stories/dj/20010522/BT20010522006901.htm

-- Martin Thompson (mthom1927@aol.com), May 23, 2001