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Senate OKs Power Plant Inspections

Electricity: Bill would widen state authority over generators. It goes to Davis, who last year backed stronger version.


SACRAMENTO -- A bill that would give state agents powerful new authority to inspect wholesale power plants and enforce prohibitions against price gouging and market manipulation was passed Thursday by the state Senate and sent to Gov. Gray Davis for his signature.

Supporters suggested that if the industry-opposed legislation had been law last year, it would have softened the crunch of the energy crisis that pounded consumers with price increases and rolling blackouts.

Senate Republicans, who voted against the measure, disagreed. They attacked it as a foolish attempt by government to meddle in affairs best left to the marketplace, and blamed the PUC for the energy crisis.

Instead of extra regulations, "we need a little more freedom," argued Sen. Tom McClintock (R-Thousand Oaks).

Davis, who supported a stronger version of the bill last year, favors the thrust of the current legislation, but is unaware of its details, said spokesman Steve Maviglio.

The bill (SB 39), heavily amended in the Assembly to weaken some consumer protections, is aimed at giving inspectors of the state Public Utilities Commission clear legal authority to examine generating plants of wholesale electricity producers to ensure that they comply with maintenance and operating standards.

Even without the bill becoming law, PUC inspectors were dispatched during the energy crisis to visit generating plants. However, the generators insisted that their operations were exempt from state regulation, and sued to halt the inspections. The state Supreme Court refused to hear the case.

During the worst of the energy crisis last year, some wholesale energy operators cut back on production or temporarily shut down their plants to perform urgent or unscheduled maintenance. Critics alleged that the real reason was to create artificial shortages that drove up the price of electricity.

Generators denied the charges.

PUC President Loretta Lynch, who lobbied for the bill, praised its passage as establishing a cornerstone in the state's efforts to avoid blackouts by bringing big players in the wholesale generation business under PUC regulation.

"This is going to be a critical tool," she said, "in trying to stop the gaming of the physical withholding of power that we saw in 2000 and 2001."

Lynch noted that the PUC has fought since December 2000 to get at generators' records to determine whether power plant production was manipulated. She said the bill would give the PUC legal access to such documents.

The PUC has regulatory jurisdiction over private utility companies but not over the wholesalers who sell power to them. The state's biggest private utilities--Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric--are fighting to stay alive and are heavily dependent on obtaining power from outside sources, including the state.

The bill would apply to nonutility wholesalers, including California-based companies such as Calpine, as well as out-of-state generators such as Duke, Dynegy, Mirant and Reliant. The bill would not apply to a class of wholesalers known as "qualified facilities." These produce renewable energy from such sources as wind, solar and biomass.

Carried by Senate leader John L. Burton (D-San Francisco) and introduced by Sen. Jackie Speier (D-Hillsborough), the bill was sent to Davis on a party line 23-13 vote. Democrats cast all the favorable votes and Republicans voted no.

The bill that emerged from the Legislature was significantly amended from the legislation as originally written, with some consumer protection provisions eliminated in the final draft.

Energy wholesalers, represented by the Independent Energy Producers Assn., lobbied against approval, arguing that the plan would create an unnecessary new level of bureaucratic regulation. They also said the PUC had conducted more than 800 inspections of generating plants but failed to produce "any finding that the plants are being run in a manner inconsistent with prudent utility practices."

Democrats countered, however, that new controls were needed to prevent a repeat of last year's electricity shortages and price spikes.

Jan Smutny-Jones, executive director of the independent producers organization, said it was uncertain whether his association would sue to block the legislation if Davis signs it.

"It all depends on how it is implemented. If the PUC becomes overly intrusive, then individual operators may take them to task," he said. "If the standards are not intrusive and allow operators [to generate power]," then legal action probably would not be taken.

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