Assembly plan allows state to help finance Edison’s new plants

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The Associated Press

State Assembly members won’t meet this week to consider alternatives to Gov. Gray Davis‘ deal to rescue Southern California Edison, but will continue working on the complex plan to keep the utility from bankruptcy.

Assembly Speaker Robert Hertzberg, D-Van Nuys, could call the members back to Sacramento next week, either for committee hearings or for a vote on the legislation, said his spokesman Paul Hefner.

Several key lawmakers have been meeting at the Capitol trying to reconcile Davis’ proposal, a Senate bill approved last week and two Assembly bills, all of which seek to restore Edison to financial health.

“We made some good progress this week, but we’ve not finished the work,” Hefner said.

The Senate, which recessed for the summer break until Aug. 20, would have to be called back to vote on the measure to make the Aug. 15 deadline in the Memorandum of Understanding Davis negotiated with Edison.

A current incarnation of the plan would drop Davis’ proposal to have the state purchase Edison‘s transmission lines for $2.76 billion to help the utility pay its debts.

Several generators, which are owed $1 billion by Edison, are concerned about part of the bill that would let the utility partner with the state’s new power authority to build new power plants.

“It does signal a shift in policy” and a return to a vertically integrated utility model, said Doug Heller, consumer advocate for the Foundation for Taxpayers and Consumers Rights.

The California Consumer Power and Conservation Financing Authority, created in a bill by Senate Leader John Burton, D-San Francisco, and signed by Davis in May, has yet to be set up. But it will have the authority to issue up to $5 billion in revenue bonds to build, purchase, lease or operate power plants.

If the power authority partners with Edison, it could give the utility’s plants an advantage over other projects, generators said.

“There needs to be equal footing with any project. You can’t favor one over another,” said Tom Williams, spokesman for Duke Energy.

However, Williams said Duke could probably build plants faster and cheaper than the utility, which has sold much of its generating capacity since the 1996 deregulation law was approved.

“The utility sector has basically demobilized their generation departments,” he said.

There is no reason for the utility to expand their generation capacity, since Davis has encouraged plant production by streamlining the application and approval process for new facilities, Williams said.

“Forward prices are coming down in future years, due to new plants that are expected to be brought online. That should serve the needs,” Williams said.

Jan Smutny-Jones, executive director of the Independent Energy Producers Association, agreed.

“It’s unnecessary. The fact of the matter is, in California today, people are building power plants, using private investment capital,” he said. “The private sector, not California ratepayers or taxpayers, should be bearing the risk of these projects.”

There is “a perception that California needs to regain control of the markets” and would do that by financing power plants, Smutny-Jones said.

But the state could help stabilize the wholesale market in other ways, such as entering long-term contracts, instead of “getting into the most risky part of the electricity business, the generation side,” he said. “I think this is not the direction that we should be going. It is a major step backward.”

Hefner, the speaker’s press secretary, said the legislation’s goal is to “restore for consumers, especially small business and residential customers, some of the protections they enjoyed before deregulation.”

If the volatile wholesale market didn’t correct itself and if power supplies remained less than demand, the Public Utilities Commission could require Edison to invest in new plants that would guarantee a cheap source of power for its customers. But, Hefner said, the bill doesn’t require Edison to expand its generating capacity.

Consumer advocates, who have sought a return to a regulated electricity market, say the plan could decrease the state’s dependence on unregulated power companies, such as the out-of-state generators lawmakers are investigating for illegal price manipulation.

“We’ve got a public power authority in the works. We should build power plants that will never be subject to future calls for deregulation or for the profit requirements of the utility,” Heller said. “The rate of return on a publicly owned power plant is zero.”

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