Davis offers proposals to invigorate deregulated electricity market

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San Jose Mercury News

SAN JOSE, Calif. _ Gov. Gray Davis offered a collection of modest measures Friday to deal with the state’s energy crisis, but he is considering a more sweeping recommendation that could cost consumers billions of dollars.

The proposals the governor made public range from temporarily halting the sale of any more utility power plants to promoting greater energy conservation to reshuffling some state agency boards. Yet one idea he didn’t mention could have a far more immediate impact on consumers.

He’s considering making them pay part of the $6 billion in unanticipated electricity costs that Pacific Gas & Electric Co. and Southern California Edison incurred last summer.

“It’s one of the many possibilities that the governor hasn’t ruled out,” said Davis’s press secretary, Steven Maviglio.

Although the two utility firms have been pressing to pass all of those costs on to customers, consumer advocates have opposed the idea and vowed Friday to fight plans to force consumers to bear even part of the expense. Last month, one consumer group estimated that the average consumer’s share of PG&E‘s bill would be $190.

“That would be just so grossly unfair in this case,” said Robert Finkelstein, an attorney with The Utility Reform Network in San Francisco. “It’s telling California consumers that it’s more important to the Davis administration to bail out the utilities than to treat you fairly.”

The idea also drew fire from Harvey Rosenfield, who on Tuesday proposed a statewide ballot initiative that would protect consumers from having to pay those costs and would impose a variety of new restrictions on the sale of electricity. If Davis pushes to have consumers pay “even a penny” of that, said Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica, “I think the governor’s career is in great jeopardy.”

John Nelson, a spokesman for PG&E, declined to comment on the cost-sharing idea, but added that, “we simply can’t continue to borrow money and finance the cost of energy that our customers are using.” Because of the state-mandated rate freeze that has shielded PG&E‘s customers from the full price of wholesale power for the past three years, PG&E officials claim they have paid $3.4 billion more for power this year than they can collect from their customers.

Although Senate Leader John Burton, D-San Francisco, hadn’t seen Davis’ ideas, he said dealing with the energy crunch will be among the legislature’s top priorities when it reconvenes on Monday. But since someone is going to have to pay for the high price of power last summer and possibly well into the future, he said, the political dilemma for lawmakers will be determining “who is going to bear the burden of the problem?”

Davis, who was in Mexico for the swearing in of its new president, Vicente Fox, was not at Friday’s news conference. Moreover, his recommendations — which were outlined in a letter responding to proposals made several weeks ago by the Federal Energy Regulatory Commission — are only what he termed “the first steps toward a plan that my administration is developing.”

Davis is expected to offer more proposals after the federal agency issues its final suggestions for fixing California’s problems no later than Dec. 13.

Even so, given the magnitude of the state’s energy troubles, his proposals had been a subject of widespread anticipation.

For utility firms, he recommended bolstering their ability to buy more of their electricity through long-term contracts, but temporarily barring them from selling off any more of their power plants, including PG&E‘s vast network of hydroelectric dams.

He suggested boosting energy conservations efforts, promoting the use of small generators at businesses, and eliminating energy company officials with “conflicts of interest” from the boards of two state energy agencies. He also suggested doing a better job of coordinating power-plant maintenance, since the state became seriously short of electricity on three days earlier this month after an unusual number of plants were down for maintenance.

Moreover, Davis reiterated his earlier plea to the federal agency to set firm wholesale price caps and to order power suppliers to refund the huge profits they made last summer, a proposal the suppliers fervently oppose.

Despite criticism from consumer groups, most reaction was positive.

“I think he fleshed out quite a good program,” said William Keese, chairman of the California Energy Commission.

D. J. Smith, a lobbyist for the California Large Energy Consumers Association, added that the package of recommendations “sets a tone from the governor’s office on what needs to be done into the future that is very important and wasn’t really there until today.”

Jan Smutny-Jones, executive director of the Independent Energy Producers Association, also liked some of what Davis proposed, although he criticized the governor’s support for wholesale price caps. “The caps are obviously being looked at as a panacea for this problem and they are not,” he said.

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