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Senate's Burton to Seek Takeover of Power Grid

Electricity: The lawmaker says acquisition would be an exchange for state help in staving off bankruptcy. Legislators on GOP side oppose the idea.


SACRAMENTO — As California's utilities press a major federal lawsuit against the state to recoup billions in losses, the Senate leader on Friday said he intends to push for state control of the massive electricity transmission system in exchange for helping the utilities avert bankruptcy.

Senate President Pro Tem John Burton (D-San Francisco) said that by taking control of the transmission grid, California can hold down costs for consumers while gaining some control over private marketers of electricity.

In recent weeks, Gov. Gray Davis, Burton and various other lawmakers have struggled to agree on which utility assets to take in exchange for helping them get out of their financial straits.

Ideas range from an equity stake in the utilities to control of their hydroelectric plants and transmission lines. On Friday, Burton said he has settled on the transmission lines--with estimated worth between $3 billion and $4 billion--as a way of solving the growing crisis.

"That is 'it,' " Burton said, describing the transmission lines as Senate Democrats' price for helping the utilities avert bankruptcy. He said he will introduce the legislation early next week.

Davis spokesman Steve Maviglio said the governor also believes the utilities must be prepared to give up something of value in exchange for the state's financial help.

"We're continuing to make progress," Maviglio said, adding that Davis sees Feb. 12 as the deadline.

Noting that any bill helping the utilities must pass the upper house, Burton said: "If the Senate doesn't agree to a deal, there isn't a deal." A side benefit of taking control of the transmission lines might be to ease pressure from consumer activists to push an initiative restructuring the power market.

"If it is a fair price that makes sense to the state and benefits the ratepayers, it will be tough to pass an initiative," Burton said.

Democrats hold large majorities in both houses, and Burton said any bill taking control of the transmission lines could be crafted so that it needs no Republican votes. On Friday, Assembly Republican leader Bill Campbell again said that GOP lawmakers oppose a state takeover of transmission lines.

"The state of California has no experience in managing high-voltage transmission lines," Campbell said. "We would have to utilize scarce resources to expand those lines that could be used on schools, roads and waterways, and there are private sector companies that could do that much better."

Southern California Edison and Pacific Gas & Electric expressed little enthusiasm for giving up any assets.

"We see no reason to change our position," Edison spokesman Steve Hansen said. "We don't want to surrender our assets."

Burton shrugged at utilities' opposition to giving the state their transmission lines, or other assets. "If they don't agree to it, they can go get their money elsewhere," he said, noting that the utilities are too broke to secure more loans. "They are not in the driver's seat.'

On Friday, PG&E and Edison defaulted on nearly all of a $684-million bill due to the California Independent System Operator, the agency that makes emergency purchases of electricity to balance the state's transmission grid and avert rotating blackouts.

As a result, Cal-ISO informed power sellers that they will get just 2% of the money owed them by the utilities for electricity sold in November. The agency also asked electricity suppliers to commit in writing to serving California if called on in an emergency, regardless of whether they are being paid.

On Friday, Houston-based Reliant Energy, which supplies 5% of the state's power, responded by filing documents in federal court in Washington, D.C., arguing that Cal-ISO cannot force the company to sell electricity to balance California's grid without assurances that the company will be paid.

Reliant's filing is not a lawsuit, merely a statement of its position, which it wanted to put on the record.

Adding to the pressure on Davis and lawmakers to exact some tangible asset from the utilities is the likelihood that consumers can expect to pay 19% more for electricity by early 2002 than they did a month ago, Burton and other lawmakers acknowledged Friday.

In making their calculations, lawmakers, who this week authorized the sale of $10 billion in bonds for electricity purchases, assume that a temporary 9% rate hike for residential users approved by the California Public Utilities Commission last month will become permanent.

Additionally, there probably will be what amounts to a second 10% rate increase in March 2002. When deregulation was approved by the Legislature in 1996, utility customers were given a 10% rate reduction, which is scheduled to expire in March 2002 and will likely not be renewed.

The Legislature and governor would have to take action to continue the 10% cut, and there has been no talk of taking such a step, said Assemblyman Fred Keeley (D-Boulder Creek), who carried the legislation earlier this week.

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