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THE CALIFORNIA ENERGY CRISIS

Bill to Rescue Utilities With Rate Hikes Stalls in Assembly

Crisis: Plan that would have authorized state to issue $10 billion in bonds to buy electricity is rejected by Republicans as a 'bailout' after the measure barely passes the Senate.

February 01, 2001|JENIFER WARREN and MIGUEL BUSTILLO and CARL INGRAM | TIMES STAFF WRITERS

SACRAMENTO — Efforts to resolve the state's power crisis hit a serious snag late Wednesday as the state Assembly appeared unable to pass a bill that would have authorized up to $10 billion in bonds to purchase power and raised electric rates for millions of residents.

The bill, which required a two-thirds vote, fell just short, and legislative leaders scrambled around midnight to see if they could convince three Republicans to change their minds.

The Senate had passed the bill earlier Wednesday, but after a debate that was at times bitterly partisan, the Assembly vote came in at 51-27--short of the 54 votes needed for passage. Assembly Republican leader Bill Campbell (R-Villa Park) was able to find only one member of his caucus to join him in supporting the bill, which was approved by all but one of the Assembly's 50 Democrats.

"I am speaking for myself tonight, not as the leader of my caucus, because I am not in alignment with my caucus," a dejected Campbell said. The apparent failure of the measure left legislative leaders uncertain of their next step as they try to stave off bankruptcy for the state's two largest electric utilities and reassure financial markets that California will be able to resolve its power crisis.

Despite the stakes, however, the Assembly's Republican minority insisted that the proposed cure was worse than the disease.

"This is a bailout and a massive rate increase for the people of California," said Assemblyman Tony Strickland (R-Moorpark), one of the leading opponents of the measure.

Gov. Gray Davis--who had repeatedly vowed to avoid using rate hikes to resolve the energy mess--defended the bill as "essential" and said Wednesday afternoon that he would sign it if it passed.

The measure would "allow us to enter into long-term contracts for electricity which will greatly reduce the cost of power in the future," Davis said in a letter urging lawmakers to adopt the bill.

In the absence of such contracts, the state is spending about $45 million a day to buy power to keep the lights on.

"Like it or not, we are in the power business," Assembly Speaker Bob Hertzberg (D-Sherman Oaks) said as his chamber began debating the bill late Wednesday night.

The long-term contracts that officials hope will lower the state's power costs are now under negotiation, with S. David Freeman, the head of Los Angeles' Department of Water and Power, representing the state in talks with power suppliers.

The bonds envisioned by the failed bill would have been paid off by electricity customers.

To guarantee the bonds--thus making them attractive on the market--the bill would have authorized the state Public Utilities Commission to raise rates. Rates for residential customers, however, could go up only if they exceed their "baseline," or minimum power allowance, by more than 30%.

Southern California Edison calculates that about half of its 4.3 million customers would have faced a rate increase under the plan unless they reduced energy consumption. That provision was roundly attacked by some consumer advocates, who called it a bailout of the utilities.

Still pending are proposals to rescue utilities from the huge debts they have accumulated in the last several months. Lawmakers are considering a measure under which the state would issue additional bonds to help the utilities pay off their debts and in return have the public receive a stake--through a type of stock option--in the companies. The utilities have balked at that idea and are pursuing litigation to force further rate hikes to pay off the debts.

Wednesday's debate was marked by rising criticism of Davis from legislators, who have accused him of responding sluggishly to the deepening energy crisis.

Before Davis' letter, lawmakers had griped that they didn't know where the governor stood on the bill: "I will not vote for it unless ownership is declared by the governor," said Sen. Don Perata (D-Alameda). "Either he's for it or he's not."

Failure of the legislation came as California marked its 16th straight day in a Stage 3 power emergency, with electricity reserves perilously low and grid managers hunting frantically for supplies.

During Senate debate, legislators characterized the vote as a painful one that they hoped they would not later regret. But a majority agreed that the alternative--doing nothing--would expose Californians to more blackouts and force the state to keep buying power at exorbitant prices on the spot market.

"Is it a whopper? Is it absolutely wonderful? No," Senate leader John Burton (D-San Francisco) said before his house approved the measure with the minimum 27 yes votes required. "Will it help us go forward until we move on some of these problems? Yes."

Sen. Debra Bowen (D-Marina del Rey) called the bill "a measure that I undoubtedly hate as much as anyone on this floor.

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