Can California be nourished by part of a hot dog?
A growing chorus of lawmakers, consumer activists and others say no.
On Monday, the governor reaffirmed his plans to take over Southern California Edison‘s portion of the electrical transmission grid, an asset that Senate leader John Burton once called a “hot dog” in a pitch to reporters.
But Pacific Gas and Electric Co.’s bankruptcy filing Friday throws into doubt whether California can take over PG&E‘s power lines, and now even one-time supporters are raising questions about the plan.
“There may be some value in having the state own the entire transmission grid, but it’s not clear to me what the benefit is to ratepayers if the state is only acquiring a quarter of it,” state Sen. Debra Bowen, chairwoman of the Senate’s energy committee, said soon after Gov. Gray Davis announced his agreement with Edison.
For months, supporters of a grid takeover – including Davis, Burton, State Treasurer Phil Angelides and consumer activists – have pressed PG&E, Edison and San Diego Gas & Electric to give up their power lines in exchange for state help in bailing the utilities out of debt.
Supporters say state ownership of power lines would give California more clout in dealing with the Federal Energy Regulatory Commission and would provide the state with an estimated $1.4 billion a year in fees collected from grid users.
The transmission grid refers to the 32,000-mile network of power lines that supply California’s electricity. Its total value has been estimated between $7.5 billion and $9 billion.
On Monday, Davis said that talks were continuing with SDG&E and that the state may ask a federal bankruptcy court to relinquish PG&E‘s part of the grid to the state. “One way or the other, we hope to be able to get all three lines,” Davis said.
Some legal experts, however, say Davis is taking a big gamble. In a bankruptcy proceeding, any transfer of lines would have to be approved by a judge and by PG&E‘s creditors, who, in this case, include some of the state’s biggest power generators.
“It would have to be done through a plan of reorganization that the creditors would have to agree to,” said David Wiggs, an energy consultant who has been advising Assembly lawmakers. “Now you have a whole other group that has to agree.”
Gary Ackerman, head of the Western Power Trading Forum, said generators aren’t convinced Davis can take title to Edison‘s portion of the grid, much less one from PG&E.
“Given this administration’s sterling record for putting together deals, I am not sure this one will work any more than the others,” Ackerman said.
Another option is for the state to use its power of eminent
domain to take over the PG&E grid. But such a move could trigger years of lawsuits and squabbles, analysts say.
“In the end, they may have to pay the debtors or the utilities a whole lot more than book value,” said Rich Ferguson, an adviser for the Sierra Club, which once supported the idea of a grid takeover.
Now, Ferguson said, environmentalists are more worried about the utility selling off its vast hydroelectric plants and land holdings in the Sierra.
“The state has to protect the hydroelectric assets,” Ferguson said. “The idea of giving commercial control over the water and power in that system is so scary that people don’t even want to think about it.”
Steve Maviglio, a spokesman for the governor, said Davis shares such concerns but is trying to salvage the best of a bad situation. “PG&E put themselves in some very uncharted waters so we will have to see where this leads,” he said.
Others fear the state could emerge from a summer of blackouts with higher rates and only part of a hot dog. It’s an unappetizing prospect, said Harvey Rosenfield of the Foundation for Taxpayers and Consumers Rights.
“Buying two out of three transmission systems is like buying a car with three out of four wheels,” Rosenfield said. “There is no point in it.”