The Associated Press

California is poised to enter the power business after the state Senate approved the creation of a public power authority and sent its bill to Gov. Gray Davis Thursday.

A power authority, supporters said, will give the state more control over its wholesale electricity market by building and operating its own power plants. State-owned plants could charge lower prices, and building new plants could increase supply and ease wholesale prices.

If signed by the Davis, the bill creates a California Consumer Power and Conservation Financing Authority that could issue up to $5 billion in revenue bonds to pay for power plants, natural gas storage and additional pipelines and conservation programs.

Opponents of the plan, most of them Republicans, have said an authority thrusts the state into a power market in which it doesn’t belong and could obstruct private interests’ efforts to build and operate power plants.

Davis has said he supports creating a public power authority similar to one in New York. The New York authority has 10 power plants, 1,400 miles of transmission lines and produces about 25 percent of the state’s power.

Nebraska also has a power authority, which created a market in which residents pay 22 percent less than the national average, said Sen. John Burton, D-San Francisco, who wrote the bill.

A Davis spokesman said Thursday that although the governor has supported the concept of a power authority, he has not decided whether or not to sign the legislation.

The authority would be run by the state treasurer and four other members appointed by the governor. It would be able to seize plants by eminent domain, a power the governor also has under an emergency order issued in January.

Treasurer Phil Angelides called the bill a significant change in California’s energy policy, because it “says we’re not going to have blind faith in the private markets and we’re going to protect ourselves from private markets run amok.”

Sen. Steve Peace, D-El Cajon, said California needs the authority because the 1996 deregulation law didn’t create real competition and the Federal Energy Regulatory Commission refuses to control rising wholesale prices.

The state’s deregulation is “the economic equivalent to the World Wrestling Federation,” Peace said. “The wrestlers follow a script and the referee, FERC, ensures it is entertaining. It is not real competition.”

The authority won’t help the state escape blackouts this summer, but will help restore reliable and affordable electricity in the future, said consumer advocate Harvey Rosenfield with the Foundation for Taxpayer and Consumer Rights.

“The agency is California’s key to survival and independence from the energy cartel,” he said.

Davis and state lawmakers are also considering purchasing Southern California Edison‘s transmission system, which would be governed by a separate public authority. Negotiations with San Diego Gas & Electric Co. are continuing. The Legislature would have to approve those buys.

The authority’s main power would be over generator construction, said Stanford University economist Frank Wolak. Energy companies would likely be hired to build the plants, something the companies are already pursuing.

“As far as operating power plants, we’re not as good as these other guys are,” he said.

However, the authority may speed the siting of power plants, an approval process mostly anchored in state agencies. Centering the approval process in the state government could speed the process, he said.

Jan Smutny-Jones, executive director of the Independent Energy Producers, said if power markets stabilize, California won’t need a power authority.

“I don’t think it will be necessary,” he said. “If … we stop the finger pointing in California, we’ll see an increase in investment in generation.”

Richard Sklar, the governor’s new energy czar, said the goal of the state’s power authority will be to balance the energy market in California and keep private companies from controlling the prices.

“The power authority is a sensible long-term strategy,” Sklar said. “It’s not a bad idea for the state, if the private sector will not build it, to build plants so supply won’t fall short of demand and this game won’t be able to be played.”

Opponents said California should create total deregulation of the electricity market, not a government solution.

The 24-14 vote on the bill was split down party lines.

Some of the most “feared words in the English language are ‘I’m from the government and I’m here to help you,”‘ said Sen. Bill Morrow, R-Oceanside.

The state Assembly passed the bill last week in a 47-28 vote split along party lines.

Pacific Gas and Electric Co. spokesman Ron Low declined comment on the legislation. Officials from San Diego Gas and Electric Co. didn’t return calls seeking comment.