State could get zapped by cost of power buys come summer

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San Diego Union Tribune

The Legislature returns from spring break today facing what some fear could become a deepening crisis runaway spending for power this summer that seriously undermines the state budget.

Estimates of what the state may have to spend on power are staggering, particularly when compared with the $7.4 billion spent in 1999 before the crisis began.

Assembly Speaker Robert Hertzberg, D-Van Nuys, mentioned $62 billion, a figure that includes all California power, whether for the troubled investor-owned utilities or strong publicly owned power systems.

The usually moderate Utility Consumers’ Action Network in San Diego thinks that spending on power by state government alone could reach $50 billion by the end of the year.

And, of course, the less-restrained Foundation for Taxpayer and Consumer Rights in Santa Monica says the generator cartel has strapped the state into the electric chair, Old Sparky, and it’s APOCALYPSE NOW.

”The cartel’s ability to manipulate supplies and create blackouts threatens to make the power bill for 2001 $72 billion,” the foundation said in a news release last week.

”That’s a California-killer. Period. Future generations will look back and wonder how we could have been so weak as to allow these people to destroy our state.”

It seems clear, in hindsight, that a historic blunder was made when the utilities were allowed to go nearly bankrupt last fall, forcing the state to step in and begin buying power for utility customers in mid-January.

But any estimate of how much money will be drained from the state treasury requires guesswork. A shortage of power plants and the scarcity of their main fuel natural gas is expected to drive up already-high prices as the demand for electricity climbs with the heat this summer.

The state was only able to obtain a small amount of power for the summer through relatively cheap long-term contracts. As a result, some fear that spending on power could sharply increase, even with rolling blackouts.

The state acknowledges spending about $1.5 billion a month to buy power so far, but the actual cost was higher. Expensive emergency purchases needed to maintain the grid were being added to the debt of utilities, until a recent decision forced the state to begin paying for them.

The original plan was to repay the state’s general fund with a $10 billion bond issue next month that would be paid off by ratepayers over a dozen years. But if state power purchases continue at the present rate, more than $18 billion will be needed this year.

Moreover, it’s not yet clear whether the bond issue could be delayed or even blocked by the bankruptcy of Pacific Gas and Electric Co., which gives a federal court an unknown amount of control over the rate revenue needed for the bond.

Gov. Gray Davis and legislative leaders have pleaded for a federal cap on wholesale power prices. But the Federal Energy Regulatory Commission has turned a deaf ear.

Some legislators are talking about seizing power plants, imposing a windfall-profits tax on generators, or seizing power contracts between generators and marketers.

The San Diego consumer group UCAN is proposing that California, Oregon and Washington form a ”buyers’ cartel” in an attempt to limit prices.

Meanwhile, if California is in fact strapped into the chair, the generators who have their hand on the switch seem to be more interested in maximizing profits than issuing a pardon.

Consumer Watchdog
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