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Power: a Start on Long Path

February 04, 2001

The state Legislature's actions in the past week should mark a watershed in California's power crisis--a point at which the state is beginning to gain control over the situation. But much of the most complex and difficult work remains to be done, and it will not get any easier for politicians who are hard pressed to answer the angry questions of consumers.

At least the lights will be brighter if the state can negotiate power contracts with private generators at reasonable prices, well below the exorbitant spot market rates the generators have been charging this winter.

The emergency bill passed by the Legislature and signed into law Thursday by Gov. Gray Davis allows the state to do what the investor-owned utilities wouldn't or couldn't under the state's botched deregulation plan. Stuck with buying day by day on the chaotic spot market, Southern California Edison and Pacific Gas & Electric went so far in debt that the generators stopped selling them power out of justifiable fear they would not be paid. Now the state will buy and sell that power, with the utilities handling the distribution and billing.

Davis says the state should be able to help meet needs without raising rates. But just in case, the bill, AB1x, allows rate hikes for consumers who use more than the average household's power. It's painful but logical for customers, especially those who use more power, to foot the bill if necessary.

The politicians in Sacramento will probably try to avoid rate increases--at least until after the next election--by pushing costs into the future. There is certainly the danger that rate hikes would be the trigger for an ill-considered ballot measure next year, such as one that would have the state simply take over the private utilities. All of the logical explanations in the world will not persuade most consumers that they should pay for this mess, a demi-deregulation crafted in large part by the utilities themselves, or that heads should not roll.

The state measure at least is not a bailout of the utilities, despite what some consumer activists charge. The legislation applies only to the future and does not deal with the billions of dollars of debt that the utilities piled up this past year. And there is no question that the cost of producing electric power has gone up. That is largely because of escalating natural gas prices, now a subject of lawsuits by state regulators and others who allege wrongdoing by pipeline owners. AB1x also does not ensure against more rolling blackouts. Demand is outstripping supply, not just in California but also in the Pacific Northwest.

AB1x is merely the first and most urgent of several complex actions the governor and Legislature need to take. The state also must deal with the utility debt issue, possibly in some kind of swap for the power transmission system, which would give the state more control over the market. California must speed the licensing and construction of new power plants without sacrificing the environment, which is relatively easy to do for plants built on existing generator sites. As for urgently needed power conservation, Davis made a good start with the $800-million program he has launched. The state also needs to develop more renewable energy to reduce dependence on a single fuel, natural gas.

The customers of the Los Angeles Department of Water and Power and other healthy municipal systems that did not join in deregulation will not be affected by AB1x, except indirectly for any taxpayer costs. They have plenty of power at stable rates. That does not necessarily mean public power is a panacea for the entire state, however. Deregulation is working in other states, though everyone recognizes now that California's plan was fatally flawed.

The state's politicians have made a creditable start on averting disaster, but they remain on the tightrope, far from safety.

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