high-tech firms weigh options
The San Diego Union-Tribune
Wall Street gave a Bronx cheer to Gov. Gray Davis‘ energy plan yesterday, as investors pushed California electricity stocks lower and analysts continued to rate utility bonds at just above the junk-bond level.
In the meantime, high-tech factories in Silicon Valley began making noises about cutting expansion plans in the state unless the broken-down electricity market gets fixed soon.
And, a coalition of consumer groups pushed for a new law requiring California’s biggest utilities to sell their power to homeowners and small businesses at a reasonable price tied directly to costs.
“Gov. Davis talked tough on Monday, but the problem is that there’s still the possibility that Californians will be paying for a bailout on their electricity bills for the next 10 to 20 years,” said Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights.
In his State of the State speech Monday, Davis earmarked $1 billion in the state budget to stabilize the electricity market and provide new power generation. Davis’ core proposal was to create a new power agency to buy and build new plants, although he provided few specifics.
Although Davis specifically targeted some of his remarks at “the investment community,” it provided little cheer on Wall Street.
Investors resumed a monthlong exodus from the utilities. Stock in Edison International, parent of Southern California Edison, dropped more than 7 percent yesterday to $11.13. Shares in Pacific Gas & Electric fell nearly 4 percent to $13.50.
The nation’s two top securities ratings firms, Standard & Poor’s and Moody’s Investment Services, complained that Davis did not immediately pump cash into PG&E and Edison, which are reportedly on the verge of bankruptcy with as much as $12 billion debt. The two utilities have a combined 24 million customers from Orange County to Northern California.
Both firms retained their lowest investment-grade ratings on the utilities’ unsecured bonds. But they refrained from moving them into junk-bond status, because they were encouraged by Davis’ statement that he would not let the utilities fall into bankruptcy.
In Silicon Valley, energy-hungry high-tech businesses are coming to grips with the fact that they may soon be paying 7 percent to 15 percent more for electricity, after the Public Utilities Commission last week decided to let PG&E and Edison raise rates.
According to the Silicon Valley Manufacturers Association, a growing number of companies are drawing up contingency plans to move plants out of the state, fearing the possibility of rolling blackouts when electricity supplies tighten next summer.
“During the last rolling blackout, on June 14, our member companies lost anywhere from $1 million on hour to $1 million a minute,” said Michelle Montague-Bruno, a spokeswoman for the association.
Kevin Carroll, who heads the American Electronics Association in San Diego, said energy prices were an important topic at a recent meeting in San Diego of high-tech lobbyists.
Carroll said he thought most major high-tech manufacturers will remain in the state, but added that there is growing uncertainty about whether they will expand here.
“At the beginning of the energy crisis, high-tech companies in Silicon Valley were strangely silent,” he said. “Back then, they viewed it as being a San Diego problem. Now, there’s more and more grumbling.”
In an effort to address the energy crisis, a coalition of consumer groups yesterday proposed legislation in Sacramento that would require PG&E and Edison to provide their locally generated power at cost, plus a reasonable profit, to small businesses, renters and homeowners.
“The big industrial users that pushed for deregulation have the ability to go out and get long-term contracts for their power,” said consumer advocate Heller.
The consumer groups also urged the creation of a new state power authority that could purchase the transmission system from Edison and PG&E and build state-owned power plants, similar to a proposal last week from state Treasurer Phil Angelides and reiterated by Gov. Davis.
The consumer groups said that if the Legislature declines to act on their proposal, they will put it into a statewide initiative by 2002.