Contra Costa Times
Gov. Gray Davis reached an agreement Monday to buy high-voltage transmission lines in Southern California for $ 2.76 billion, just days after Pacific Gas & Electric Co.’s dive into bankruptcy court complicated the governor’s plan to use a powerline buyout to keep the state’s struggling utilities afloat.
The agreement, completed after an intense weekend of final negotiations that extended until 5 a.m. Monday, would put the state in the business of running a portion of the power grid while providing Southern California Edison with an infusion of cash to pay off billions in debt. The plan still needs legislative and regulatory approval.
“Because they (Edison) are people of good will, because they are concerned about their customers, they stayed at the bargaining table,” Davis said.
Davis said that PG&E, which awarded executive bonuses last week, filed for bankruptcy “for its own selfish reasons . . . and on the way they padded their pockets.”
“This is a good deal for the consumers of this state and it will get Edison back in business,” Davis said.
The broad outlines of the agreement call for the state to pay 2.3 times the book value — the original cost to purchase the lines minus depreciation — for 12,000 miles of transmission wires. The system would continue to be operated and maintained by Edison, under contract with the state.
In exchange, Edison would provide electricity from its power plants at regulated rates for 10 years and dismiss a lawsuit that seeks more than $ 5 billion from ratepayers to make up for losses since last year, among other considerations. Edison also gives up its development rights on 260,000 acres.
The deal, however, still must be approved by lawmakers, state and federal regulators.
“It is our feeling that this plan is dead on arrival,” said Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights, a Los Angeles-based group that has advocated for a state takeover of power plants.
“It is inconceivable to us that any lawmaker who will have to face their constituents any time soon would dare stand by such an unadulterated and complete giveaway to Edison,” Heller said.
Assembly Speaker Robert M. Hertzberg, D-Van Nuys, was noncommittal.
“Of course, we are anxious to see the details, including the costs to the state,” Hertzberg said. “And I am most anxious to review the protections the plan provides to California residential and business consumers.”
Assemblyman Dave Cox, the lower house’s GOP leader, said the plan would fail.
State buyout of the utilities’ transmission lines was an idea hatched to allow the utilities to pay past- due bills and recover losses suffered since last May, when wholesale electricity prices shot above the retail rates the utilities are allowed to pass on to consumers.
In recent weeks, state regulators have taken a variety of steps to address purchases of power in the future, including a rate hike that has been approved but not yet implemented.
Edison, for example, claims to have lost $ 5.5 billion through January to high wholesale costs. It has about $ 2.6 billion in unpaid bills with more coming due. It had, as of about two weeks ago, about $ 1.9 billion in cash.
By selling the transmission lines, the utility would be able to pay its bills, borrow money and become viable again, according to the company.
There is widespread belief, however, that state ownership of the transmission system only makes sense if the state can acquire the power lines from all three utilities. Davis said he expects to begin negotiations with San Diego Gas & Electric today, but now that PG&E is in bankruptcy proceedings, its transmission lines will be more difficult to get.
“One way or the other we hope to get all three lines,” Davis said.
“Given our set of facts, we continue to believe that a Chapter 11 reorganization is the most feasible means to reach a solution,” PG&E said in a corporate statement.