FOX SPECIAL REPORT

HUME:

California officials are blaming deregulation for the current electricity emergency in that state. In fact, what California did was to deregulate the prices that utilities pay energy suppliers, while continuing to regulate — that is fix — the prices they charge energy consumers.

At the same time, environmentalists have blocked construction of new power plants, and with already high demand exacerbated by cold weather, utilities are going bankrupt buying high and selling low, and suppliers say they don’t want to sell to them.

Now the governor wants the state to take further control. The latest from Claudia Cowan.

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CLAUDIA COWAN, FOX NEWS CORRESPONDENT (voice-over): Governor Gray Davis wants to turn the state government into California’s biggest power broker.

GOV. GRAY DAVIS (D), CALIFORNIA: Right now, the utilities are buying power at roughly 30 to 35 kilowatt cents per hour. We can contract in the 5- to 5-1/2 percent — an enormous savings providing stable, reliable, affordable power to the people of the state.

COWAN: Without offering specifics, Davis says he wants to sign long- term contracts with electricity wholesalers in a plan that aims to reconcile consumer needs with the financial concerns of California’s two major utilities. Southern California Edison and PG&E have amassed billions of dollars of debt by paying more for electricity than they’re legally able to charge.

But even without hard details on price or number of years, lawmakers say California has the clout to deal with wholesalers and get the power needed now.

JOHN BURTON (D), CALIFORNIA STATE SENATOR: The state is credit worthy and, therefore, when you sign a contract with us for five years, you know you’re going to get the money. They won’t sign a contract with utilities for five days, and that’s — that’s basically the difference.

HARVEY ROSENFIELD, FOUNDATION FOR TAXPAYER RIGHTS: The average rate payer could be completely screwed by this proposal and not know it if they can conceal it in the current prices.

COWAN: Critics are skeptical and warn consumers could be stuck with high bills once more power plants are built and wholesale prices fall.

(on camera): Pressure to find some kind of resolution is coming from well beyond the state line. Economists point out the energy crisis has put the Silicon Valley’s technology industry at risk, and any threat to the new

In San Francisco, Claudia Cowan, FOX News.