Calif. Plants: No Help in Plan

Tuesday, January 9th 2001, 12:00 am

By: News On 6

SACRAMENTO, Calif. (AP) â€” Gov. Gray Davis has proposed an overhaul of California's troubled electricity system, including creation of a public agency to build power plants, but the cash-starved utilities at the heart of the crisis say the plan offers too little short-term relief.

In his annual address to the state legislature Monday night, Davis called California's power system deregulation ``a dangerous and colossal failure.'' He threatened to seize the plants of wholesalers who gouge consumers or utilities.

``There is no easy solution,'' Davis said. ``But, if I have to use the power of eminent domain to prevent generators from driving consumers into the dark and utilities into bankruptcy, then that's what I'll do.''

Pacific Gas and Electric Co. and Southern California Edison Co., together serving about 25 million people, have been stung by a fivefold increase in wholesale prices since June. Rate caps have prevented the utilities from passing the higher costs on to customers, leaving them with $9 billion in losses.

PG&E and SoCal Edison say they face insolvency if they don't get more cash soon.

``While the governor's statements are welcome, we are concerned that unless strong action steps are taken over the next few days, the financial crisis facing California's utilities will bring us to the point where we can no longer buy electricity and gas for our customers,'' PG&E said in a statement.

SoCal Edison said ``urgent action is needed'' to assure its fiscal stability.

Davis' speech contained his strongest comments to date on California's electricity crisis. He pledged to set aside $1 billion in the 2001-02 state budget to stabilize the supply and price of electricity and provide new power generation.

Davis rejected suggestions from consumer groups that PG&E and SoCal Edison be allowed to go into bankruptcy

``Our fate is tied to their fate. Bankruptcy would mean that millions of Californians would be subject to electricity blackouts,'' Davis said.

But he offered few details about his core proposal, the creation of a new power agency to buy and build new plants. He said he envisioned a state power authority, or perhaps an entity controlled jointly by the state and more than two dozen municipal utilities.

The Democratic governor did not mention a proposal to use state-backed bonds to finance the utilities' debt. Assembly Republican Leader Bill Campbell described that as a ``major hole'' in the governor's presentation.''

Assembly hearings on the electricity crisis were scheduled to begin Thursday.

California's electricity grid has been stressed for months. A hot summer followed by a cold winter have kept demand high, and supplies have been pinched as aging plants are idled for maintenance. Also, the power needs of neighboring states have reduced the supply of imported electricity.

Davis demanded criminal penalties for wholesalers that withhold power from the California grid during emergencies, and authority to force idled power plants back into operation. He also proposed adding 50 inspectors for the Public Utilities Commission, and said his emergency powers should be expanded in the event of power outages.

The commission approved electric rate increases of 7 percent to 15 percent last week to help the troubled power companies, but Wall Street and the utilities called the move inadequate.

Fiscal analysts say more rate hikes â€” or some other form of new revenue â€” is needed for the investor-owned utilities.

``We have to be able to restore in the minds of the financial community the creditworthiness of California and its public utilities, or will not have the ability to borrow the money to keep the lights on,'' said Tom Higgins, a senior vice president of SoCal Edison.

Meanwhile, Energy Secretary Bill Richardson extended his emergency order requiring suppliers to sell electricity to California when the state runs short.

Richardson and Davis were to meet Tuesday in Washington, D.C., to discuss potential solutions to the energy problems. Treasury Secretary Lawrence Summers also was to attend the meeting, along with Federal Energy Regulatory Commission Chairman James Hoecker.

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On the Net:

California Gov. Gray Davis: http://www.governor.ca.gov

Federal Energy Regulatory Commission: http://www.ferc.gov