The Associated Press

Consumer advocates who have fought fiercely against rising utility rates remain skeptical about the state’s energy crisis, but some are at least hopeful new legislation will help shift the power business into the state’s hands.

The Senate approved a bill Tuesday that would create a power authority. The bill’s proponents say it would give the state more control over the wholesale market by buying or creating state-owned power plants that could charge lower rates.

Ratepayer advocates said the state should have moved toward the public power model five years ago instead of its “failed experiment” with deregulation, citing lower rates municipal power customers have paid throughout the crisis.

“The Department of Water and Power in Los Angeles and Sacramento Municipal Utility District, have proven that publicly owned power systems can be more efficient, more reliable and more affordable for consumers,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

But if the state starts seizing plants, it could deter private companies from building more power generators in the state, having the opposite effect lawmakers were trying to achieve, said Jan Smutny-Jones, executive director of the Independent Energy Producers.

“That’s the big concern I have – that as California starts to creep toward nationalizing their system, they’re going to drive away the very plants they need to attract,” he said.

The bill, which is touted to ease wholesale prices through increased supply, has yet to gain Assembly approval.

Administration officials continued meeting with Southern California Edison and Pacific Gas & Electric Co. executives in San Francisco on Tuesday, negotiating Gov. Gray Davis‘ plan to rescue the financially ailing utilities, said governor spokesman Steve Maviglio.

Davis and state lawmakers are considering taking over the utilities’ transmission system, along with the responsibility of upgrading and maintaining the aging lines. The power authority would also have the authority to seize plants by eminent domain, a power the governor also has under an emergency order issued last month.

Davis has said he’d rather negotiate a deal with the utilities for their transmission lines or other assets in return for helping the companies regain their creditworthiness.

Skyrocketing wholesale electricity prices, due to high natural gas prices and scarce supplies, have nearly driven the state’s two largest utilities into bankruptcy.

“With the passage of this bill … I think we can say deregulation in the state of California is officially dead,” said Sen. Bill Morrow, R-Oceanside.

The 24-14 vote on the bill by Sen. John Burton, D-San Francisco, was split down party lines, with all Republican senators voting against the measure.

PG&E spokesman Ron Low declined to comment on the legislation. SoCal Edison representatives didn’t return calls by The Associated Press seeking comment.

Another bill still in the Senate would give Davis the authority to negotiate the purchase of the utilities’ transmission lines – about 60 percent of the state’s power grid. The other 40 percent is owned by municipal districts and the federal government.

Sen. Steve Peace, the Chula Vista Democrat who was one of the primary authors of the state’s 1996 energy deregulation law, has avoided much of the current debate, and has sought to blame the energy crisis on federal regulators’ refusal to impose price caps on wholesale energy bills.

But on Tuesday, he urged the governor to seize the state’s power plants, many of which are owned by Texas companies.

“This is the only choice the kidnappers have given us,” Peace said. Either take control of the generation plants “or raise the Lone Star flag to the top of the Capitol and give up the ghost.”

California’s two largest utilities say they’ve lost nearly $13 billion due to high wholesale power prices, which the state’s 1996 utility deregulation law blocks them from recouping from customers.

The state has already stepped in, committing $10 billion to purchase power for customers of Edison and PG&E. That and other fixes under consideration by Davis and lawmakers – including a state purchase of 26,000 miles of transmission lines – could cost consumers and taxpayers $20 billion, or roughly $590 for every California resident.

The bulk of the money would come from bond sales to be repaid by utility customers over many years.

Also Tuesday, a federal court judge refused a power generator’s request to be paid for electricity sold to the two utilities through the nearly defunct California Power Exchange.

U.S. District Court Judge Carlos Moreno said he wants power companies and the exchange to agree to a standstill while FERC decides how money and debts will be allocated among exchange members.

A hearing has been scheduled for Thursday to discuss an injunction that would bar the exchange from charging the power generators their share of the default and keep generators from receiving payments until FERC rules.

The state remained in a Stage 2 power alert Wednesday morning. A 32-day-long string of Stage 3 declarations was lifted over the weekend as several power plants returned to service. A Stage 2 alert means reserves are close to five percent; a Stage 3 is called when reserves approach 1.5 percent and blackouts are possible.