STATE OKS $2.76 BILLION TO ACQUIRE POWER LINES
The Daily News of Los Angeles
Gov. Gray Davis announced Friday that the state has reached a tentative agreement with Southern California Edison Co. to buy its transmission lines for $2.76 billion to help resolve the state\’s energy crisis.
He said the agreed-upon figure, about 2.3 times the estimated book value of the assets, will allow the company to stave off bankruptcy by issuing bonds to pay off billions of dollars in debt accumulated by purchasing electricity at high prices in recent months.
\”This is the framework of a good, balanced deal,\” Davis said in a Los Angeles press conference. \”It\’s not a final deal. There\’s a lot of work to be done. But we\’re making progress.
\”It is my hope and expectation that no more burden will be asked of the ratepayer.\”
Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, called the agreement an \”outrageous sellout of the ratepayers by Gov. Giveaway.\”
Rosenfield said the state\’s flawed deregulation law froze California residents\’ electricity rates at a level 40 percent above the national average even before Davis ordered a 9 percent increase last month. Rosenfield predicted consumers will get an additional 10 percent increase before the crisis is resolved.
\”Purchasing the transmission system would help restore reliability to the energy system in California, but overpaying for it is simply a bailout,\” Rosenfield said. \”He\’s basically taking a good idea and using it as window dressing for a massive bailout of Edison.\”
Capping a week of intense negotiations, the state is in talks that would allow it to buy 26,000 miles of transmission lines from Edison, Pacific Gas and Electric and Sempra Energy, which operates San Diego Gas & Electric. The total cost could range from $4.5 billion to $7 billion.
The plan is structured to prevent the state\’s two largest investor-owned utilities, Edison and PG&E, from going bankrupt.
Between soaring wholesale power prices and state-imposed rate caps for consumers, the utilities estimate they have lost nearly $13 billion since June.
Davis said negotiators have made substantial progress in talks with Edison and hope to have a final deal in a week. He said they are making \”good\” progress with Sempra Energy and \”some progress with PG&E.\”
\”Southern California Edison followed this course of action because it is in the interest of our ratepayers, our creditors, our shareholders and our employees,\” said Stephen E. Frank, chairman, president and chief executive officer of Edison.
John E. Bryson, chairman, president and chief executive officer of Edison International, the corporate parent of Southern California Edison, said it is important to restore \”normalcy to California\’s electricity situation.\”
\”There are still many challenges ahead over the next several years in providing our customers with reliable, stable electricity,\” Bryson said. \”While we continue to believe that as a matter of law and equity we are entitled to be fully reimbursed for the cost of purchasing power on behalf of our customers, this agreement is far preferable to perhaps years of protracted litigation for our ratepayers, shareholders, creditors and employees.\”
\”We\’ll acquire the transmission lines because the enhanced capacity will have the same effect as building two more power plants, making 1,000 more megawatts available,\” Davis said.
State Assembly Speaker Bob Hertzberg, D-Van Nuys, welcomed the governor\’s announcement, which he said shows \”clear progress is being made.\”
But Hertzberg said leaders must \”move quickly\” to \”protect Californians from bearing the brunt of deregulation\’s broken promises.\”
\”I am particularly pleased that this agreement requires Edison\’s parent company to foot part of the bill. And the agreement also appears to guarantee more long-term power to Californians at low prices,\” Hertzberg said.
Also, Edison has agreed to commit the entire output of the parent company\’s Sunrise Mission power plant at low \”cost-based\” rates for 10 years, a value to ratepayers of $500 million over the next two years, according to the governor.
Edison also agreed to provide cost-based rates from the generating facilities they own for an additional 10 years, conservation easements on 20,000 acres of watershed lands for 99 years and to drop their pending litigation against the Public Utilities Commission that would have resulted in immediate higher electric rates for consumers if they had prevailed in court.
Davis said the agreement will provide the state with long-term power at \”very cheap rates.\”
\”I hope within a week to give you our final blessing on this transaction,\” he told reporters at a news conference in Los Angeles. \”This entire transaction, which I believe is fair and balanced for both sides, will be accomplished within the existing rate structure.\”
Sherry Bebitch Jeffe, a political analyst and senior scholar at the School of Policy, Planning and Development at the University of Southern California, said Davis\’ announcement of the tentative agreement could help the state\’s negotiators and the governor when he goes to Washington, D.C., this weekend for the National Governors Association conference and meets with U.S. Energy Secretary Spencer Abraham on Sunday.
\”This could be a tactic by which the governor is forcing Southern California Edison to move toward finalizing the agreement,\” Jeffe said. \”Maybe this is all about positioning. Positioning the governor as he goes east and positioning Edison and the other two utilities so that if they balk, they will be the villains.\”
–The state will buy Edison\’s transmission lines for about $2.7 billion.
–SoCal Edison will sell electricity produced by its power plants to the state at near cost for the next 10 years.