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California and the West

Looking for a Solution on Power

Electricity: Legislators are considering a special session in hopes of heading off more price surges and blackout threats.


SACRAMENTO — California legislators are seriously considering a special session to deal with the state's electricity woes.

With California's two biggest utilities already $5 billion in debt from last summer's electricity price spikes and no new major power plants ready, there's wide agreement that the summer of 2001 could bring more shocking prices--and greater blackout threats.

There's more at stake than the billions of dollars in additional costs to California utilities and consumers. The political backlash of another summer of price spikes, legislators say, could kill off California's 2-year-old experiment with deregulation.

Consumer groups are already crafting a ballot measure for 2002 to put power plants in public ownership, they note. "We will have a political revolt on our hands if people view the rates that come in their electrical bills every month as unjust and unreasonable," said state Sen. Debra Bowen (D-Marina del Rey), chairwoman of the Senate energy committee.

She said the Legislature could help brace the state for next summer's demands by giving utilities clear authority and leverage to sign long-term deals now with power plant owners to lock in prices.

"Time is going to be critical," said Bowen. Utilities must begin negotiating for such deals immediately, she said.

A bill passed in the regular session of the Legislature--which returns to Sacramento full time in January--could not take effect until the following year. But a bill passed in a special session and signed by the governor could take effect within 90 days. A special session could begin in December or run concurrently with the Legislature's regular session in January, Bowen said.

Gov. Gray Davis has authority to convene a special session, and did so in January 1999 to pass education reform bills swiftly. The governor is open to the idea of another special session, said spokesman Steve Maviglio. Davis canceled a trip to Asia this month, saying he needed to focus on electricity issues.

Whether Davis calls such a session, Maviglio said, depends on a pending order by the Federal Energy Regulatory Commission. The commission regulates wholesale electricity nationwide and is set to order significant changes in California's troubled electricity markets by the end of the year.

Commission officials have called California's deregulated power market dysfunctional and the prices it generates unreasonable. Those prices averaged nearly four times higher last summer than in the summer of 1999.

But, to the chagrin of Davis and other politicians, the federal commission has for now declined to force power sellers to give back some of their extraordinary profits. Commission staff members say they lack clear legal authority to order such rebates, and blame a widening gap between power demand and supply for many of the state's troubles.

If the commission ultimately orders no rebates, another high-stakes electricity problem will remain unresolved: whether and how to allow Pacific Gas & Electric Co. and Southern California Edison to recoup the roughly $5 billion those utilities have paid since June to buy electricity.

The utilities could not pass that unanticipated cost on to the 22 million Californians they serve, because those customers are protected by a rate freeze imposed in 1996 as part of the Legislature's deregulation law. That rate freeze will disappear in March 2002 at the latest.

The courts may ultimately divide up the pain of that $5 billion. Both PG&E and Edison sued the state Public Utilities Commission this month in federal court, seeking authority to pass the costs to their customers.

Residents of San Diego and southern Orange County have already felt that pain. The rate freeze was lifted early for the 1.2 million people served by San Diego Gas & Electric, and consumers saw monthly electricity bills double, and in some cases triple, last summer. The Legislature halted the spiraling bills in September with a temporary rate cap, but customers are expected to pay full costs over time.

The utilities' losses are mounting daily as the cost of electricity still hovers above the price the utilities can charge customers.

"I want the problem solved. If a special session helps it, terrific," said Bob Foster, an Edison senior vice president. But many solutions are within even quicker reach of the Public Utilities Commission, he said.

Edison's request to sign five-year contracts at a fixed price for enough electricity for half a million homes has been awaiting approval since August at the PUC. Foster said the PUC staff fears that the contracts will appear imprudent later if the price of electricity drops.

"You're never going to hit it right on," he said. "The more important thing is to provide stability and predictability for customers."

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