Legislators considering taking over some plants, power lines

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The Associated Press

Weekend negotiations among lawmakers resulted in plans ranging from having the state acquire the transmission systems of the state’s two largest utilities to making the state the owner of their dams and hydroelectric plants.

Assembly Speaker Robert Hertzberg, D-Van Nuys, proposed having Pacific Gas & Electric Co. and Southern California Edison Co. donate their hydroelectric plants to the state. Utilities would still have other generating plants that would produce power they could sell to their customers, at a profit.

Lawmakers are also renegotiating rates between utilities and so-called “qualifying facilities” – renewable power plants, such as biomass, solar and co-generation – to lower the cost of those contracts, said Assemblyman Fred Keeley, D-Boulder Creek.

Renewable energy accounts for about one-third of the state’s energy, and utilities have long-term contracts to buy that power, at a cost of between 13 cents and 17 cents per kilowatt hour. Keeley says if those costs can be reduced to below the rate cap, the utilities could make some profit on that power.

Senate President Pro Tem John Burton is considering similar legislation that would have the state take over transmission lines, said his spokesman Dave Sebeck.

In exchange for the assets, the state would assume the duty of buying any additional power needed to serve the utilities’ customers. No price tags were immediately available on either plan.

Whether that power is bought through low-cost, long-term contracts or on the expensive day-ahead market, the state will pick up the tab under Hertzberg’s plan, said Paul Hefner, spokesman for Hertzberg.

Since the cost of wholesale power is much higher than what the state charges consumers for its hydroelectric power, revenue bonds would be issued to make up the cost until wholesale prices stabilized, Hefner said.

The plan banks on lower wholesale prices, he said.

“We’re not counting on that happening immediately, which is why we’re talking about issuing revenue bonds in the first place,” Hefner said.

Hertzberg’s plan assumes that the recent temporary rate increase by the PUC is made permanent, Hefner said.

Assembly Republican Minority Leader Bill Campbell, R-Villa Park, said supporters of the plan have “taken their eye off the ball.”

“Confiscating utilities’ generating assets … that doesn’t add one more bit of energy generation in the state,” he said.

Instead of taking over the hydroelectric plants, Campbell proposed the state use the hydroelectric plants as collateral.

Davis is reviewing Hertzberg’s and Burton’s plans, but considers the hydroelectric plan more attractive because the power lines are old and need billions of dollars in upgrades, spokesman Steve Maviglio said.

Consumer advocate Harvey Rosenfield said he’d rather see the state in the transmission business, because it would give them more leverage with out-of-state generators who have been charging high prices.

“We’d rather have the wires,” he said. “Then you can tell them ‘You can charge us as much as you want, but we’re going to charge you a special surcharge to transport your power.”‘

But Rosenfield, who works with the Foundation for Taxpayers and Consumers Rights, says advocates are watching closely for anything that looks like a bailout – and are highly suspicious of Hertzberg’s plan.

“When the plan is for the utilities to give a gift to the public, you know it’s a gift that will force the ratepayers to keep on giving,” said Rosenfield.

Other legislation considered Monday included:

– A plan by Keeley would let the state enter long-term, low-cost contracts for power that would be sold directly to consumers. The bill has a cap of 5 1/2 cents per kilowatt hour, but wholesalers say that’s too low to attract bids. Lawmakers are considering capping the rate at the price the state could charge consumers – about 6 1/2 cents per kilowatt hour in the north and 7 1/2 cents in the south.

– State Controller Kathleen Connell has asked for a bill that categorizes the money Davis allotted through his emergency order and $400 million in emergency legislation as sales to utilities. Connell said her goal is to protect the state’s funds and ensure repayment if the utilities file for bankruptcy-court protection.

“If the state is going to bear the entire burden of this, we need to disclose that publicly, and then it becomes a gift of public funds,” Connell said. “If we expect to be repaid, we need to say that now, so there’s a legal mechanism for being repaid.”

The state spent $38 million under the emergency order, and $113.2 million since then, including $35.2 spent Monday, said Mike Sicilia, Davis’ spokesman.

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