WASHINGTON — Government and industry officials agreed late Tuesday to try to ease California's energy crisis by giving utilities more time to pay the billions of dollars they owe for high-priced electricity and arranging for suppliers to provide power under fixed-price, long-term contracts.
The state government itself might become a major buyer of power from the generating companies "at an attractive fixed rate," according to a statement issued after a seven-hour negotiating session that ended shortly after midnight Washington time.
Gov. Gray Davis and other California political leaders huddled behind closed doors at the U.S. Treasury headquarters in an effort to find a solution to the crisis that has sent power prices soaring and threatened bankruptcy for utility companies.
"We can see light at the end of the tunnel," Davis said early today, after the meeting broke up. "While there's still a lot of work to do, I think we're making progress."
The forces that have been engaged in a war of words for months--politicians, regulators and executives--finally managed to hammer out a basic understanding. In a statement issued by the participants after the meeting, they emphasized the "need for cooperation to maintain stability and avoid bankruptcy of California utilities and assure the long-term regularity of market conditions."
The ultimate impact of any deal on consumers is unclear. The power producers agreed in the short run to give Pacific Gas & Electric and Southern California Edison "forbearance," or more time to pay the billions of dollars they owe for wholesale electricity purchased on the expensive spot market.
Davis refused to make any commitment at the meeting to supporting additional rate increases for residential and business consumers. He also refused to promise that some of the state's budget surplus could be used to help the utilities and ease the burden on consumers, an idea that has been suggested by some federal officials.
The California Public Utilities Commission last week approved a temporary 9% price increase for customers of Southern California Edison and PG&E, the state's largest privately owned utilities.
There was no firm agreement on how the cost of resolving the crisis would be divided among consumers, the utilities and the companies that generate power and sell it to the utilities for distribution to homes and businesses.
"Who is going to eat how much of this? It's a long way to figuring that out," said one knowledgeable source.
One attendee said substantial progress was made in bringing together warring camps. "Giant steps were made toward a solution," the attendee said. "But nobody's signed on the dotted line."
The discussions focused primarily on the need to achieve long-term stability in electricity supplies to avoid the kind of price spikes that occurred last year.
"This problem will never go away, unless we can diminish our reliance on the spot market," Davis said. "That is best done through long-term contracts. . . . We believe we can contract at very attractive prices, which will bring stability to the futures market, ensure reliable power at an affordable rate."
The governor said he was optimistic. "I think we made great progress. . . . We're going to do our part in California to start passing legislation to minimize this challenge and to help bring it to a successful conclusion."
Davis and other state officials would not discuss specifics of their talks. "We've got work to do in the Legislature now, some of it related to implementing what we discussed tonight," said Assembly Republican Leader Bill Campbell of Villa Park.
Working groups were to resume discussions later today, and additional meetings of the principals will be held over the weekend.
Davis and other California officials have pushed for a firm cap on wholesale electricity prices in the West. Federal regulators have opposed a strict cap.
With the Clinton administration leaving office Jan. 20 and the nascent Bush administration adopting a hands-off attitude, officials said before the meeting that the burden would be on California to solve its problems without significant outside help.
Certainly, the political situation in Washington makes any direct federal help somewhat unlikely. And with Republicans about to assume control of the White House, the Senate and the House for the first time since 1953, there will probably be even less enthusiasm for a federal solution to what is perceived by many as a state problem.
Sen. Dianne Feinstein (D-Calif.) reportedly is pursuing a seat on the Senate Energy and Natural Resources Committee, an assignment that would help her promote her legislation to limit wholesale electricity prices in the West.
But one of the Senate's most influential conservative members, Phil Gramm (R-Texas), said he would fight any effort to "take California politicians off the hook."
Gramm strongly denounced proposals to provide significant federal assistance to help the state out of its energy deregulation fix.
"As they suffer the consequences of their own feckless policies, political leaders in California blame power companies, deregulation and everyone but themselves, and the inevitable call is now being heard for a federal bail-out," he said. "I intend to do everything in my power to require those who valued environmental extremism and interstate protectionism more than common sense and market freedom to solve their electricity crisis without short-circuiting taxpayers in other states."
Rep. Joe Barton (R-Texas), chairman of the House Commerce subcommittee on energy and power, also has scant sympathy for California.
The state "had a chance last summer to make some of the fundamental changes," Barton said, referring to the period when electricity prices first began rising substantially.
Times staff writer Dan Morain in Sacramento contributed to this report.