Calif faces “pay now or later” plan

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United Press International

A plan that would thrust the state into the roll of electricity broker was set to be presented to the California legislature this week, although the proposal was receiving a cool reception on Monday from some consumer advocates and industry representatives.

Gov. Gray Davis, who has been seeking a way to defuse the continuing slugfest in the electricity market, announced over the weekend that he would propose legislation that would allow the state government to buy power at a rate of around 5.5 cents per kilowatt-hour and then sell it at the same price to cash-strapped utilities that have been forced to pay higher prices due to their deteriorating credit rankings.

Energy traders, maligned for being on the right side of a sellers’ market, would find themselves dealing directly with state officials under Davis’ plan, which was floated to the media during the weekend amid teleconference discussions among the major players in the ongoing energy crunch — including energy traders, power generators, utilities and officials from the state and federal government.

The proposal is aimed at using three-year contracts to secure supplies at a fixed cost that is below current wholesale prices. The prices, however, would likely be above the projected going rate a few years from now.

Consumer advocates immediately pounced on the plan, labeling it a “bailout” of Southern California Edison and Pacific Gas & Electric — the two cash-strapped utility companies that had pushed for deregulation of the state’s electricity market. The advocates protested that innocent consumers should not have to pay above-market prices in the coming years.

“The Legislature should order the PUC (Public Utilities Commission) to regulate rates to ensure that Edison and PG&E cannot collect excess charges from ratepayers that would allow them to pay down the debts they incurred as a result of deregulation,” the Santa Monica-based Foundation for Taxpayer and Consumer Rights said in a statement.

The industry camp also appeared to be taking a cautious approach, with critics claming that the 5.5-cent price proposed by Davis was too low to cover high natural gas costs. The Los Angeles Times said Monday that power suppliers have said they need a minimum of 8.5 cents per kilowatt-hour.

“I don’t think suppliers, given all the money on the table, are going to bend very much on contract terms and price,” Gary Ackerman, a spokesman for the trade association Western Power Trading Forum, told the Times.

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