Step triggers fears of high utility bills
California officially entered the power business Thursday when Gov. Gray Davis signed a $ 10 billion package that even supporters called a poor answer to the state’s escalating energy crisis.
After failing to pass the plan early Thursday, Davis and Democrats
in the Assembly returned hours later to hammer through a measure that will allow the state to sign long-term contracts to purchase electricity at fixed rates for up to a decade.
The electricity will then be sold to customers of the state’s
two largest, cash-strapped utilities.
The legislation aims to relieve pressure on Southern California
Edison and Pacific Gas & Electric, which have racked up more
than $ 12 billion in debt buying power at high wholesale prices.
They cannot pass on those costs to customers under the terms of
California’s deregulation law passed in 1996.
Though the package alleviated concerns that the state might run
out of electricity, it sparked outrage among consumer groups and
opposing lawmakers who say it guarantees higher bills for consumers.
A provision of the package allows the state to recoup costs by
raising consumer rates in certain instances. “This just hand
Rosenfield, president of the Foundation for Taxpayer and Consumer Rights. “Deregulation was the crime, and this is the coverup.”
The legislation will allow the state to spend up to $ 500 million
buying more electricity on the expensive spot market, where California has been spending $ 40 million to $ 50 million a day. The remainder is earmarked for cheaper, long-term deals with wholesalers.
To encourage conservation, residential customers who use 30% more energy than a “baseline” amount would be punished with higher rates.
The baseline will be determined by the state based on regional
climate and average energy use.
Some consumer advocates estimate that 35%-50% of the two utilities’ 9 million customers could see rate hikes. “This is a pig in a poke,” said Republican Assemblyman Rod Pacheco, “It is an unlimited rate increase, and there’s no question about that.”
The Assembly’s 54-25 vote — barely enough for the two-thirds
majority needed to send it to the governor — illustrated the
divisiveness among lawmakers. The search for votes had Davis working the phones and even prompted Democratic leaders to send a California Highway Patrol plane to the Bakersfield area to pick up a lawmaker sick with bronchitis.
“I just go where they tell me to go and get on the plane they
tell me to get on,” said Democrat Dean Florez.
Even lawmakers who supported the bill said they did so reluctantly.
They used words such as “hate” to describe their feelings about
it but added that it’s the best plan possible.
“This measure offers our best hope of avoiding electricity rate
increases in future years,” Davis said after signing the bill.
But he also said, “I look forward to the day when the state is
out of this business.”
Passage came on California’s 17th straight day of Stage 3 power
alerts, and reserves threatened to fall below 1.5%.
The state reported no rolling blackouts Thursday.
California’s energy woes, which have spilled into the Pacific
Northwest and other states in the region, will be discussed today
in Portland when Energy Secretary Spence Abraham meets with Western governors.
The energy troubles have forced Enron, the No. 1 seller of natural gas in the USA, to switch dozens of its largest corporate customers in California to PG&E for their power.
Enron buys electricity at wholesale rates from the California
Power Exchange, which recently said it would close because of
the power crisis.
Enron spokeswoman Peggy Mahoney said that Houston-based Enron still would honor the long-term contracts and discount prices of its customers.
Executives at supermarket chain Safeway, high-tech firm IBM and
Kaiser Permanente, a health-maintenance organization, said that
Enron reassured them that it plans to stick to the agreements.