Efforts to pass state legislation to bail out Southern California Edison, the
other investor owned utility facing bankruptcy with $3.9 billion debt, were
delayed when the bill that bounced from the Senate passed the Assembly with
modifications that enraged opposition in the Senate. SCE set Sept.14 as a working
deadline to get legislative relief to keep the company solvent. Gov. Gray Davis
reportedly mounted a full court press to gain passage but the delay indicated
his efforts needed greater Senate support to prevent another blow to the state's
deregulation woes. Also at stake was the ability of the state to sell
bonds worth more than $12 billion to help fund the outstanding debt for long
purchases the state incurred to help bail out SCE and PG&E,
already in Chapter 11 bankruptcy, so that customers of these companies would
not face the full bill. The bond sale has been delayed several months and still
faces uncertainty on Wall Street. Consumer groups oppose the Davis legislative
plan as "just an Edison bailout."
The state moved much closer to organizing a government-run monopoly for gas
and electricity. It inaugurated the hastily conceived Consumer Power and Conservation
Financing Authority, with immediate plans to create a state-owned reserve of
3,000 megawatts of power supply by next summer. State-owned resources can be
used to reduce the threat of blackouts and drive down wholesale prices by reducing
private generators' hold on the market, according to the Governor. State Treasurer,
Phil Angelides, board member and advocate, said the Authority should "be
strong enough, mobile enough, and entrepreneurial enough that it will be a competitor
to the private sector." The new agency's board chair and interim CEO, S.
David Freeman said, "The legislature has created a consumer protection
agency. Our job, if I can borrow a phrase from the Boy Scouts, is to be prepared...[we]
need to tame the runaway market that was gouging the heck out of all of us."
Swift opposition was voiced by Jan Smutny-Jones, head of the Independent Energy
Producers Association who said, "If the power authority is designed to
complement and supplement what's going on in the private sector, fine. If they're
trying to compete, ultimately the taxpayers will lose a lot of money. Sec. of
State, Bill Jones, called it "the birth of another useless bureaucracy."
The agency has borrowed $5 million from the state for startup fees and will
finance its operations with up to $5 billion in revenue bonds.
The idea of state public power authorities may be catching on. In Indiana, state
Sen. Craig Fry announced his plans to introduce legislation to create an 11-member
Public Power and Finance Authority that would compete with investor-owned utilities
to produce and sell electricity. He said, "In the wake of the Indiana Senate's
failure to act on utility reforms, I have spent much of this summer contemplating
what could be done to both protect residents and businesses of this state and
ensure that we do not suffer power losses and rolling blackouts that have come
to California. Based on these two needs, I believe that a public power authority
is the best long term answer to our problems. It would provide additional competition
that would help keep costs to consumers low and expand our capacity to ensure
that we have sufficient energy reserves in the future." He admitted that
his plan was, in part, a response to his general mistrust of big business and
utilities in particular.
Meantime, the CA PUC floated steps to cede control for electricity price setting
to the state Department of Water Resources to help assure that prices committed
to by the state would be recovered to pay the $43 billion accounts payable.
The DWR began shopping around for gas also, to help assure that consumers would
not be unfairly billed for unjustified markups for electricity generated by
gas. As part of its program the PUC would also suspend the program that allows
customers to shop around among competing suppliers. The fear is that if larger
users can cut deals at lower prices than the state paid, the folks left behind
will be paying the difference. This outcome is, of course, opposed by The Utility
Reform Group representing consumers. It says the state power buy was intended
to benefit all consumers equally. State financial officials say these draconian
steps are needed to assure Wall Street that CA customers will be required to
help pay the bills, in addition to taxpayers.
Understandably, these plans met emotional opposition by the Foundation for Taxpayer
and Consumer Rights. Harry Rosenfeld, founder, threatened to wage "the
mother of all ballot wars" if the state power buyers are not subject to
voter oversight. Doug Heller, spokesman for the Foundation said, "They're
proposing to throw up their hands and say the power companies won, the utilities
won, and the public has lost. Whatever revenue requirement DWR says it needs,
it gets. That's just bad government."However, delays in selling the bonds
can begin costing CA taxpayers even more after October, when interest rates
on a bridge loan ramp up. These concerns prompted one PUC member, Richard Bilas,
to observe, "We're in a position where we can really mess up the finances
of this state, and I'm not going to put myself in a position to do that."
If consumer choice is eliminated, little would be left of the consumer side
of California's venture into deregulation. State Sen. Debra Bowen said, "We
sort of have this hybrid that in some ways is the worst of all worlds. She believes
that reviving full-fledged competition may not be practical for years. Rick
Couniham of Green Mountain Power said, "It looks to me like a state-run
monopoly." Sec.of State, Bill Jones, who is seeking the Republican nomination
for Governor bemoaned, "Little by little, the public trust is slipping
away from our officials at the state level."
Jack Stewart, president of the CA Manufacturers and Technology Association said
his members were shifting their attention to other energy options, such as allowing
companies to generate their own power and sending jobs out of state to avoid
the huge rate increases that threaten to put them out of business. Said Robert
Batemen, who runs Roplast Industries, a plastic company, "It's not possible
to go on like this."