The California legislature hopes to end the state’s energy crisis by considering a plan Tuesday to make California a major electricity broker.
However, it will take tough price negotiations to make such a plan effective in allaying California’s near-crippling energy woes, state officials and power providers said Sunday.
The state has been repeatedly hit with power emergencies over the summer and winter, and came close to suffering rolling blackouts late last week.
After a seven-hour meeting with energy providers, state and federal officials, Gov. Gray Davis said Saturday that the state plans to enter into contracts with electricity wholesalers to purchase power and sell them to utilities.
The state could negotiate better prices than the financially unstable utilities, which have amassed billions of dollars in debt buying energy in a California market unhinged by deregulation and supply shortages.
But if the state-negotiated rates turn out to be much higher than those on the market once the electricity crisis ends, power wholesalers could reap a windfall at California taxpayers’ expense.
Still, the announcement was an important step, said Tom Williams, a spokesman for power-plant operator Duke Energy.
”But there remains to be a lot of hard work to do on everybody’s part,” he said Sunday.
Davis and legislative leaders planned a phone conference Sunday night to discuss the details of a power plan that will go before the Legislature on Tuesday, said Steve Maviglio, the governor’s spokesman.
State officials are seeking contract rates of 5 to 5 1/2 cents a kilowatt-hour, but state Senate President Pro Tem John Burton told the Sacramento Bee that power producers ”didn’t come in with that kind of offer.” Instead, the operators are seeking a rate closer to 7 or 8 cents a kilowatt-hour.
While that’s higher than the 3 to 4 cents a kilowatt-hour electricity sold for a year ago, it’s considerably lower than the 30 cents a kilowatt-hour Southern California Edison Co. officials said they’ve had to pay in recent months.
Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, a consumer advocacy group, said the state should not agree to pay long-term prices because rates will drop even more once the crisis is resolved.
”Whenever they’ve got a gun to your head, it’s a bad time to cut deals,” Rosenfield said, adding that the foundation will sue to overturn any deal that commits the state to paying ”artificially high” prices, or offers bailouts to utility companies.
California’s two biggest investor-owned utilities, Pacific Gas & Electric Co. and Southern California Edison, say they have lost more than $9 billion because of wholesale price increases and the state’s 1996 deregulation law that froze rate hikes.
The utilities, which won permission to raise rates two weeks ago, said the temporary increases approved by the state Public Utilities Commission aren’t enough and have warned they could soon go bankrupt if something isn’t done.
Like the utilities, Davis has blamed energy wholesalers for exacerbating the crisis by using the tight electricity supply to send prices skyrocketing.
But the Democratic governor added that the utilities shouldn’t expect the pending deal to serve as a bailout.
”They are not going to get all their money back,” Davis said.