The Associated Press
More than two months after Gov. Gray Davis agreed to help financially strapped Southern California Edison in exchange for buying its power transmission lines, skeptical senators began weeks of hearings on the proposal Tuesday.
“It’s a multibillion dollar business proposal that if enacted will have a long-lasting impact on every resident and business in this state,” Senate Energy Committee Chairwoman Debra Bowen, D-Marina Del Rey, said in leading off the review.
Senators immediately questioned whether the agreement requires enough of a sacrifice by the utility’s stockholders, its parent corporation, and the electricity generators who charged the high prices that have forced Edison to the brink of bankruptcy.
“It ought to be shared pain,” argued Sen. Byron Sher, D-Stanford.
Consumer groups, in turn, lined up to question the proposal’s value to ratepayers.
But helping Edison pay its $3.5 billion debt is key to getting the state out of the electricity buying business, said Barry Goode, Davis’ legal affairs secretary.
Much as Davis wanted the utility and generators to pay a financial penalty as part of the deal, it proved impossible to determine who owes what to whom at this time, said Goode told senators. That should be left to later civil and possibly criminal court cases, Goode said, though consumer groups said the agreement undercuts those investigations.
Davis’ proposal, unveiled April 10, calls for the financially strapped utility to sell about 6,000 miles of power lines to the state for $2.76 billion, 2.3 times their book value, and sell energy at low prices for 10 years.
The hearings began a day after Davis announced a similar plan to buy San Diego Gas & Electric Co.’s 1,800 miles of transmission lines for about $1 billion to help pay off its $750 million debt.
The state has authorized more than $8 billion since January to buy electricity on behalf of the two cash-strapped utilities and Pacific Gas and Electric Co., which declared bankruptcy after the three investor-owned utilities were overwhelmed by soaring wholesale electricity prices. The Edison agreement calls for the state to restore the utility to financial health by the end of next year.
Senators questioned whether the transmission lines are worth buying, particularly at the price Davis negotiated.
Numerous variations on the plan have circulated for weeks among lawmakers, and Davis has said he is open to any proposal that would restore Edison to fiscal health while minimizing the cost to its customers.
Consumer groups lined up to denounce any efforts to help the utility at taxpayers’ or ratepayers’ expense.
“We cannot afford the luxury of the ratepayers of Southern California bailing out the mistakes of Southern California Edison,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights. Edison and PG&E sought the state’s 1996 deregulation law, reaped the benefits, and now should bear the consequences, he and other consumer representatives said.
But business groups backed the concept, though representatives of the California Chamber of Commerce and California Manufacturing & Technology Association said they expect it to look far different by the time it clears the Legislature.
Davis persuaded senators to hold the hearings despite their reluctance to adopt his plan.
“We’re dealing with a resurgence of something everybody thought was dead a couple weeks ago,” Rosenfield said.
Bowen plans another hearing Wednesday to consider the impact on the Edison proposal of the $43 billion in long-term contracts with 18 power generators that Davis released Friday.
She plans a third hearing to consider the long-term structure of California’s electricity market once the state is no longer forced to buy electricity, and whether the state should scrap its deregulation law.
Bowen plans additional hearings to consider details of Davis’ plan, including its restrictions on the California Public Utility Commission’s regulations and investigation; the value of Edison‘s transmission system; and its means of passing on Edison‘s debt to the utility’s ratepayers.
Meanwhile, the Senate’s Judiciary and Natural Resources committees plan their own hearings in advance of the Aug. 15 deadline for legislative action.