Rate hike prompts calls for state to seize plants

Published on

The Associated Press

In his State of the State speech in January, Gov. Gray Davis said the state could seize power plants if its energy crisis worsened.

Critics now say it’s time for the governor to make good on that threat, with electricity rates for millions of customers soaring and blackouts forecast for summer.

“I don’t think there is any other alternative,” Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica, said Tuesday. “We can’t continue to pay the prices charged by this energy cartel.”

Rosenfield and other consumer activists are urging the governor to invoke eminent domain, the right of the government to acquire private assets for public use.

In raising that possibility in January, Davis said the state “will regain control over the power that’s generated in California and commit it to the public good.”

On Tuesday, however, a spokesman said Davis is no closer to invoking eminent domain than when he broached the idea in his address.

“It is a disastrous idea and something the governor would only explore as a last resort,” spokesman Steve Maviglio said. “Everything we have done to date has been to avoid that action.”

The state would have to pay a fair price to companies that bought plants from Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric. The investor-owned utilities were forced to sell their generating assets under the state’s 1996 deregulation law.

Some of the companies that bought them paid hundreds of millions of dollars to enter California’s deregulated market.

Charlotte, N.C.-based Duke Energy Inc., for example, spent $501 million for three power plants.

“All we have said about eminent domain before is if, in fact, they exercise it, we would vigorously defend our interests,” Duke spokesman Tom Williams said.

“The market value for our plants is very expensive – very expensive.”

Critics have accused out-of-state energy companies of price gouging. The Federal Energy Regulatory Commission has asked suppliers to justify $124 million in sales during the first two months of the year or refund the money.

Despite the potential public appeal of using eminent domain, it might not be practical, experts said Tuesday.

The price of buying the plants and operating them afterward could cost the state more than it would save by producing its own power, said Jim Powers, a Los Angeles attorney who has worked for Edison on eminent domain issues.

“The real problem wouldn’t be the power to take it – it would be paying for it,” he said. “And how do you run (the plants)?”

Such action also could prompt costly and lengthy legal action as power companies tried to hold onto their assets or fight for greater compensation, he said.

Under eminent domain, the governor would designate a state agency, such as the Department of Water Resources, to declare the move necessary.

The agency also would have to file a court motion and post a bond equal to the plants’ estimated worth – including any future profits lost by the owners.

The state then could take over the plants in as little as 90 days, pending legal challenges. The final price for the plants could be decided in court.

“It would a battle of the appraisers,” Powers said.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases