California Lawmakers Pass Energy Plan

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The New York Times

With deadlines looming and electricity at dangerously low levels for a 17th straight day, the California State Legislature narrowly approved a $10 billion plan today to let the state buy power through long-term contracts, a first step toward stabilizing its troubled utilities and keeping the lights on while officials seek solutions to the state’s energy crisis.

The measure passed the Democratic-controlled State Assembly this afternoon by exactly the two-thirds margin needed for it to take effect immediately, amid intense partisan wrangling and mounting bipartisan criticism of Gov. Gray Davis‘s handling of the crisis. Governor Davis, who also announced a separate batch of emergency conservation measures, including a compulsory plan to curtail outdoor lighting at retail businesses like car dealerships, undertook frantic last-minute lobbying for the bill.

The measure authorizes the state to issue revenue bonds to buy power at lower prices than are available on the daily spot market and pass the electricity on to the state’s nearly insolvent utilities. But critics complained that the measure would lead to rate increases.

After the State Senate approved the bill on Wednesday, the measure was three votes shy of the two-thirds majority needed in the Assembly early this morning, after a Democrat broke ranks to join all but two Republicans in opposing it. Legislative leaders, aghast at what would happen if the bill failed, promptly moved to reconsider it and rounded up the votes by midday.

“If we don’t do this, the imminent bankruptcy of the utilities is so awful, if it should occur, in its effect on ratepayers that it is almost unimaginable,” the bill’s sponsor, Assemblyman Fred Keeley, Democrat of Santa Cruz, told his colleagues.

Failure to pass a bill would have been a severe blow to the state’s two largest shareholder-owned utilities, Pacific Gas and Electric and Southern California Edison, whose billions of dollars in debt has all but shut them out of the power market. It also would have been a blow to Mr. Davis, a cautious, centrist Democrat whose representatives had hoped to begin hammering out long-term power contracts today, to end state spending of as much as $45 million a day to buy power on the spot market. A federal order requiring neighboring states to sell power to California will expire next week.

As he signed the bill, Mr. Davis said it represented “the first critical steps on the road to recovery.” He added, “We’re making progress, but we shouldn’t kid ourselves: big challenges still lie ahead.” They include finding ways to conserve more energy and speed the construction of new power plants without damaging the environment.

Mr. Davis said he still hoped to avoid new rate increases, though politicians in both parties here said it seemed all but certain that temporary rate increases, averaging about 9 percent, approved recently by the State Public Utilities Commission for customers of Edison and Pacific Gas and Electric will become permanent. The utilities have been pushed to the brink of bankruptcy as wholesale electricity prices have spiraled out of control, while the state’s deregulation plan has barred the companies from raising retail rates.

To guarantee the bonds that would finance power purchases, the measure passed today would allow the Public Utilities Commission to raise consumer rates. But, to encourage conservation, rates for residential customers would go up only if they used 30 percent more power than “baseline” levels set by a formula that takes into account regional differences in climate and energy use. Edison has said about half of its 4.3 million customers would face rate increases under the plan, unless they reduced the use of power.

Assemblyman Rod Pacheco, a Republican from Riverside who voted against the bill, complained: “This is a pig in a poke. It is an unlimited rate increase.”

The utilities expressed cautious approval of the bill’s passage, but consumer groups continued to raise alarms, arguing that the state would still pay inflated prices for energy.

“This is most definitely a bailout of private corporations that is not justified, even given rolling blackouts,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, which has threatened to put an initiative on next year’s statewide ballot that would impose a windfall profits tax on power generators. “The effort would have been far better spent on a bill that simply took over the transmission system without locking California into buying power at unconscionably high prices, when prices are bound to decline in later years.”

Legislative leaders in both parties, who have been critical of Mr. Davis’s handling of what they call a crisis and he calls a “challenge,” ratcheted up their criticism over the past 24 hours. Senate Republicans and even some Democrats demanded that he send a letter announcing his support and promising to sign the measure before the vote on Wednesday. Though Mr. Davis called a special session of the Legislature to deal with electricity, he let legislators take the lead in proposing specific measures, then reacted to them.

“I will not vote for it unless ownership is declared by the governor,” State Senator Don Perata, a Democrat from Alameda, said before the vote.

The Legislature has barely begun to consider a range of other measures, from creation of a state authority to finance the construction of power plants to a measure to retire billions of dollars in utilities’ debts in exchange for a state stake in the companies, either though stock options or control of transmission lines. Most legislators said the struggle to pass the measure today was a sign of the long road ahead.

“Obviously, this is not the end of the story,” said the Assembly’s Democratic speaker, Robert M. Hertzberg, who is from suburban Los Angeles. “This is just one of the chapters in a very long, ‘Moby-Dick’-style book.”

Mr. Hertzberg got a firsthand idea of the challenges when a lone member of his caucus, Barbara Matthews, a freshman assemblywoman from an agricultural district who is concerned about power costs for farmers, at first refused to support the bill and angry Republicans refused to supply the majority needed for passage, despite the pleas of their leader, Bill Campbell, who could find only one other Republican vote. After receiving assurances that agricultural power users would not be left in the lurch at harvest time, Ms. Matthews switched her vote this afternoon, and two more Republicans signed on, just enough for passage.

Today, joined by business executives and sheriffs from around the state, Mr. Davis announced a series of conservation proposals that he said would be the most aggressive in the nation, including an executive order, in which he invoked his emergency powers, to have law enforcement officials devise a plan to compel retail outlets to curb outdoor lighting at night by March 15 or face fines of $1,000 a day.

Mr. Davis called for millions of dollars in incentives for consumers to replace old appliances with energy-efficient models and for businesses to install energy-saving equipment and lighting. He also announced that all 1,100 McDonald’s fast-food outlets in California would distribute 4 million paper place mats on their trays, featuring conservation tips. The state’s Department of Consumer Affairs will also spend $20 million for the first stage of a campaign of radio and television advertisements encouraging consumers to avoid using power during periods of peak demand.

Mr. Davis previewed the first advertisement, which featured a dirty sock hanging from a hamper, as an announcer intoned, “If you knew that by doing a full load after 7 p.m. you could help avoid rolling blackouts and make sure schoolkids don’t sit in the dark and help keep your electric bills down, you might just let that sock stay dirty a little longer.”


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