Back from recess, legislators to find focus has shifted in energy crisis

INSIDE POLITICS ED MENDEL

Back from recess, legislators to find focus has shifted in energy crisis

By Ed Mendel

August 20, 2001

SACRAMENTO -- As the Legislature returns from summer recess today for the final four weeks of the session, the electricity crisis shows signs of ending not with a bang but a whimper.

The widespread fear that California would be barbecued over the hot flames of rolling blackouts and runaway power costs this summer has faded.

Now much of the focus is on four things: Will Southern California Edison join Pacific Gas and Electric in bankruptcy? Will a $12.5 billion ratepayer bond be issued on time? Are $43 billion worth of long-term state power contracts too expensive? And what is the role of the new state power authority?

Assembly Democrats prepared yet another version of an Edison rescue plan last week. But Senate Democrats are sticking with their hard-nosed plan that Edison says will not restore its creditworthiness. Minority Republicans are on the sidelines.

Legislators are reluctant to vote for any Edison rescue plan that looks like a "bailout" or giveaway. Consumer groups would challenge the plan with an initiative, creating an issue in the legislative elections next year.

PG&E has until early December to unveil a plan for working its way out of bankruptcy. If Edison goes bankrupt instead of providing a model for getting PG&E out of bankruptcy, the state might have to remain in the power-buying business for a number of years.

The state Public Utilities Commission is scheduled to take a series of actions Thursday that would pave the way for a $12.5 billion ratepayer bond in October needed to repay the taxpayer-supported general fund for power purchases made since January.

The general fund spent $6.2 billion on power before the state obtained a $4.3 billion short-term loan in late June. The $12.5 billion bond, paid off by ratepayers over 15 years, would repay the general fund and the short-term loan and cover some future power costs.

If the PUC action this week gives too much ratepayer revenue to the state, PG&E could file a lawsuit that would delay the bond issue. But the state plans to get a $5.7 billion short-term loan in September to replenish the general fund.

A prolonged delay in the $12.5 billion bond probably would not force cuts in other state programs until the new fiscal year beginning next July. Meanwhile, falling prices allowed rate revenue alone to cover the cost of power during the first half of this month, easing the drain on the money borrowed in June.

An estimated $43 billion worth of contracts may cause the state to pay above-market rates for power for the next decade. The administration says the contracts are "insurance" and have lowered prices in the spot market and will provide control in the future.

The contracts are financing a wave of new power plants, and the state is trying to buy cheap natural gas that could lower contract rates. But some legislators want to reopen the contracts, perhaps by pressuring California firms Sempra and Calpine, or by citing the conflict of state power purchasers who were fired because they owned generator stock.

The new power authority controlled by appointees of Gov. Gray Davis is scheduled to meet Friday. Davis has said the authority could build supplemental power plants if the private sector does not create the 15 percent surplus of power some say is needed to make deregulation work.

But some legislators want to move farther toward public power. Edison rescue plans in both houses of the Legislature have proposed that residential power remain regulated, while businesses would be free after several years to shop around for power.

Ed Mendel is Capitol bureau chief for the Union-Tribune.