Temporary takeovers to be spelled out in bill

By Bill Ainsworth STAFF WRITER

June 12, 2001

SACRAMENTO -- Like nuclear weapons in the Cold War, the takeover of power plants by the state has loomed in the background of the electricity crisis as a weapon so scary and extreme it could never be responsibly used.

Assemblyman Juan Vargas, D-San Diego, wants to change that.

Vargas is promoting a plan that he says will avoid huge costs and years of litigation by allowing the state to take over electricity generating plants temporarily.

Once the electricity crisis has passed, the state would give back the plant to its owner and pay rent for using it, rather than the high price of buying it outright. Call it plant seizure lite.

The freshman lawmaker will present his plan today to the Assembly Judiciary Committee, which is expected to approve the measure along party lines.

"It's a big deal to take over a person's property," said Vargas. "But this is reasonable. It's rational. They forced us into it and it's time to fight back."

Some believe the state, by seizing power plants, could obtain electricity for less than it pays in the existing market, which is widely deemed to be overpriced.

But Gary Ackerman, executive director of the Western Power Trading Forum, a group of power generating companies, said the Vargas plan would hurt the state's efforts to build enough plants to ease the crisis.

"I don't think there is such a thing as seizure lite," he said. "Any discussion of plant seizures for a day or a lifetime has a devastating effect on the business climate."

Even a temporary state takeover would discourage investors who want to build new generating plants to increase the supply of electricity, he said. It would also discourage bond investors whom the state wants to tap to repay state taxpayers for buying high-priced electricity on the spot market.

Vargas admits that the governor could temporarily take over plants now without waiting for legislative action. Still, he said, a bill would give the governor more support.

"It gives the idea legitimacy," he said.

At issue are the generating plants sold by the state's major utilities, mostly to southern-based companies. Those companies have made huge profits while charging skyrocketing prices that have caused the financial collapse of the state's two major utilities.

Davis has portrayed those companies as ruthless price gougers that maximize profits at the expense of California's economy. He has threatened to seize plants, but then backed away. Few believe the centrist Democrat wants to risk such a move that could alienate the business community, especially now when the energy market is showing signs of stabilizing.

Additionally, a permanent takeover could force the state to pay billions of dollars for an outdated, aging facility, said Vargas, because the value of the plant would be determined by the high prices the plant is now charging for electricity.

In his research, Vargas said he found that the U.S. Supreme Court in 1949 held that the state needs only to pay the rental value of a property it seizes temporarily. On top of that, he said, the law specifies that the Public Utilities Commission, controlled by Davis appointees, would determine the value of the rent.

http://www.uniontrib.com/news/uniontrib/tue/news/news_1n12rent.html

-- Martin Thompson (mthom1927@aol.com), June 12, 2001

Answers

My experience has been that most "lite" stuff either doesn't work very well, doesn't "taste great", or isn't "less filling".

-- PHO (owennos@bigfoot.com), June 12, 2001.