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California and the West

State Spends $5.1 Billion on Power

Budget: Amount is total for 2001. Official says credit rating will suffer if general fund isn't repaid soon.


SACRAMENTO — California has spent $5.1 billion from the state budget purchasing electricity this year, state legislators learned Monday, as the Assembly approved legislation to boost energy supplies by speeding power plant construction.

The tally by the Department of Finance means that California has been spending an average of $54 million a day since it started buying the electricity that the state's major private utilities could no longer afford.

The continued purchases are taking a dramatic toll on the state budget, and on Monday, state Treasurer Phil Angelides warned legislators that if the budget is not repaid soon, the state's credit rating could soon be downgraded on Wall Street.

"We need to get the general fund out of this business," Angelides said.

Gov. Gray Davis and the team of financial experts he assembled to work on the energy crisis have estimated that California would spend $15 billion this year buying electricity. Nonetheless, Davis has said he expects to repay the budget by June 30 and remove the state from the power-buying business.

Under the plan to buy power signed into law by Davis, the budget is supposed to be repaid for electricity purchases with a record bond issue. The bonds, in turn, are to be repaid by utility ratepayers through their monthly electric bills.

But the plan--which was based on the premise that the state would be able to stabilize power prices by entering into long-term contracts with electricity suppliers--has not gone as expected.

Power prices appear to be going up, not down, heading into the peak summer months. State Sen. Joe Dunn (D-Santa Ana) said at a budget subcommittee hearing Monday that the gloomy predictions suggest California will pay $150 million a day this summer.

Administration officials told another Senate budget subcommittee Monday that despite working to sign long-term deals, the state will still have to purchase as much as 70% of the power it needs this summer through either short-term contracts or on the expensive spot market.

On a daily basis, California has bought about a third of the 45,000 megawatts of electricity supplied to customers by California's financially hobbled private utilities, said Ray Hart, who oversees power purchased by the Department of Water Resources.

Hoping to increase electricity supplies, the Assembly passed a bill Monday that would accelerate power plant construction by cutting the time local agencies could debate the proposals.

The bill, SB 28X by Sen. Byron Sher (D-Stanford), still requires final Senate approval. It limits to 100 days the time a local agency has to do a final review of a power plant project before the California Energy Commission. The streamlined review would be in place until 2004.

"It does shorten the time frame for local governments," said Assemblyman Fred Keeley (D-Boulder Creek). But "it does provide enough time for local governments to have their concerns aired."

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