Calif. May Buy, Sell Electricity

Monday, January 15th 2001, 12:00 am

By: News On 6

LOS ANGELES (AP) â€” A plan to try to fix the energy crisis by making the state a major electricity broker will likely be introduced to the state Legislature on Tuesday, officials said.

After a seven-hour meeting with energy providers, and state and federal officials, Gov. Gray Davis said Sunday the state will try to sign contracts with electricity wholesalers to buy power and sell it to utilities.

The state believes it can negotiate better prices than financially unstable utilities, which have amassed billions of dollars in debt buying energy in a California market unhinged by deregulation and supply shortages.

State officials are seeking rates of a nickel to 5 1/2 cents a kilowatt-hour, but state Senate President Pro Tem John Burton told the Sacramento Bee that energy producers ``didn't come in with that kind of offer.'' Instead, operators are seeking closer to 7 cents or 8 cents a kilowatt-hour.

While that's higher than the 3 cents to 4 cents a kilowatt-hour that electricity cost a year ago, it's considerably lower than the 30 cents a kilowatt-hour Southern California Edison Co. officials said they've had to pay in recent months.

But if state-contracted rates turn out to be significantly higher than market rates after the crisis subsides, power wholesalers could reap a windfall at California taxpayers' expense.

The state has been buffeted by repeated power emergencies during the summer and winter, and came close to rolling blackouts late last week.

There is growing support in the Legislature for allowing the state to buy and sell electricity, but tough price negotiations will be needed, state officials and power providers said.

Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, said the state should not enter into long-term contracts because rates will drop after the crisis.

``Whenever they've got a gun to your head, it's a bad time to cut deals,'' Rosenfield said, adding that the foundation will sue to overturn any deal that commits the state to paying ``artificially high'' prices, or offers bailouts to utilities.

California's two biggest investor-owned utilities, Pacific Gas & Electric Co. and Southern California Edison, say they have lost more than $9 billion because of wholesale price increases and the state's 1996 deregulation law that froze rate hikes.

The utilities, which won permission to raise rates two weeks ago, said the temporary increases approved by the state Public Utilities Commission aren't enough. They have warned they could go soon bankrupt.

Like the utilities, Davis has blamed energy wholesalers for taking advantage of the tight electricity supply to gouge their customers.

But the Democratic governor added that the utilities shouldn't view the pending deal as a bailout.

``They are not going to get all their money back,'' Davis said.

On the Net:

California Independent System Operator: http://www.caiso.com

Foundation for Taxpayer and Consumer Rights: http://www.consumerwatchdog.org/