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California and the West | THE CALIFORNIA ENERGY CRISIS

Bill Proposes Power Line Purchase

Measure would authorize the state to spend billions to buy transmission grid from the utilities. They could use the funds to pay off debts.


SACRAMENTO — Senate leader John Burton on Tuesday introduced a bill that would empower the state to buy California's sprawling network of private electricity transmission lines, laying out a plan that he has long championed but may face a struggle in the Legislature.

The plan would provide billions in cash to debt-ridden Southern California Edison and Pacific Gas & Electric Co. and the third big investor-owned utility, San Diego Gas & Electric Co., while giving the state a tangible asset for its rescue efforts.

Burton, a powerful San Francisco Democrat, offered the bill as a way to help Edison and PG&E pay at least part of what they say is nearly $13 billion in debts and give California consumers "some control over our electrical destiny."

"If [utilities] expect to get money from the ratepayers, the ratepayers have to get something from them. I give you a dollar, you give me a hot dog. It's that simple," Burton said at a packed news conference.

He said potential alternatives facing the utilities--which have thus far balked at the idea of giving up their valuable transmission assets--include Gov. Gray Davis using his emergency powers to "commandeer" the transmission lines or the state seizing them by condemnation, a slower process.

Burton said he believes that making the state government California's primary operator of high-voltage lines would create no vast bureaucracy and would not result in rate increases for consumers.

For weeks, Burton has advocated public ownership of the 26,000 miles of the statewide grid as Davis and the Legislature try to deliver Californians an asset of the utilities in return for some form of financial rescue.

The Burton plan received enthusiastic endorsement from three consumer organizations: the Utility Reform Network, the Utility Consumers Action Network and the California Public Interest Research Group. Elsewhere, the reception was lukewarm at best.

Steve Maviglio, spokesman for Davis, declined to comment on specifics of the Burton proposal.

"It's the subject of negotiations," Maviglio said. "In terms of concept, the governor hasn't ruled it out or ruled it in."

Davis favors a system of warrants in which the state, in effect, would become an investor in the troubled companies. When the utilities regained their financial health, the warrants would be cashed in at a higher value, as with stock options.

Edison has had "some initial discussion" with drafters of legislation, Senior Vice President Bob Foster said in a conference call Tuesday with debt holders.

"We're looking at it very hard," he said, but cautioned: "We have not signed off on this by any stretch of the imagination."

One proposal, Foster said, has the state paying perhaps 2.3 times the book value of the grid, with Edison using the money to pay down the nearly $5 billion in debt it has amassed in buying electricity for its customers. The Rosemead-based utility values its portion of the grid at $1.3 billion, Foster said.

Burton said the price would be subject to negotiation. He distributed a document Tuesday that placed a value on the grid of at least $3.8 billion, including $1.9 billion for Edison's portion.

PG&E, which declined to comment on the Burton bill, has previously said that it is reluctant to part with assets to receive state help, but the San Francisco-based utility is seen as being more willing to part with its transmission network than with its hydroelectric generation system.

Senate Republican leader Jim Brulte of Rancho Cucamonga, an influential minority-party player in fashioning legislative responses to the energy crisis, declined to comment.

But Assembly GOP leader Bill Campbell of Villa Park called the Burton plan "potentially dangerous" for the California economy.

"If this crisis teaches us anything, it teaches us that government has no experience in the power business and even less expertise," Campbell said.

To pass, the Burton bill, SB 33X, would not require favorable votes from Republicans in the Democratic-dominated Senate or Assembly. Burton said he expects it to be voted on by the full Senate in a matter of weeks. The bill would create a California Transmission Authority that would acquire the grid with the sale of revenue bonds and become its owner and operator, taking over functions of the current Independent System Operator. The bonds would be repaid by fees charged to generators to have their electricity transmitted on the grid.

Sen. Byron Sher (D-Stanford) said public ownership of the high-voltage lines is the "next logical step" in the state's efforts to tame the energy crisis. Last week, Davis and the Legislature put the state in the business of buying power for 27 million residents now served by Edison, PG&E and SDG&E.

Sher said a priority of the Burton program would be to upgrade what he called the utilities' "neglected" transmission system, including a key bottleneck blamed for rolling blackouts Jan. 17-18 in Northern and Central California.


Ingram reported from Sacramento and Rivera Brooks from Los Angeles.

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