Davis endorses rate hikes, defends handling of energy crisis | TahoeDailyTribune.com
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Davis endorses rate hikes, defends handling of energy crisis

SACRAMENTO, Calif. (AP) – Gov. Gray Davis told Californians in a live address Thursday night that he now thinks rate increases are needed to resolve the state’s power crisis.

Davis, reacting to record rate hikes of up to 46 percent approved by state regulators last week for Pacific Gas and Electric Co. and Southern California Edison power customers, said he wants to make those who use the most electricity bear the bulk of the price hikes.

”The more you conserve, the more you save,” Davis said. ”Conservation is our best short-term weapon against blackouts and price-gouging.”



Speaking from his Capitol office in a televised five-minute speech, Davis lashed out at federal power regulators for failing to help California and defended his handling of the state’s energy problems.

The Democrat told viewers California’s short power supply and high wholesale costs are the result of a ”flawed deregulation scheme” signed into law in 1996 by then-Republican Gov. Pete Wilson.



”But no matter how we got into this mess, you hired me to solve problems and that’s what I’m doing,” he said.

Davis said he has fought utility rate increases ”tooth and nail” but now thinks they are needed to help finance the state’s power purchases on behalf of Edison, PG&E and a third strapped utility, San Diego Gas & Electric.

The power buys have cost taxpayers $4.7 billion since January, money that will eventually be recouped from ratepayers.

Davis said the utilities were pushed to the brink of bankruptcy by soaring wholesale power costs and federal regulators’ refusal to cap wholesale prices.

”In January, with the feds still refusing to do their job, California stepped in to purchase the power the utilities could no longer afford to buy,” Davis said. ”We didn’t take over to save the utilities. We took over to keep the power on and the economy strong.”

Davis, who repeatedly has said the state can resolve the power problems without rate hikes, told viewers he now thinks rate increases are necessary to finance the power purchases.

His new stance comes after the state Public Utilities Commission last week approved rate increases of up to 46 percent for customers of Edison and PG&E.

The commission has not yet decided how to spread the rate increases among the utilities’ customers.

Davis said he will propose a tiered rate plan that would mean a 26.5 percent rate increase for the average customer. Under the governor’s plan, the heaviest power users would see an average 34.5 percent rate increase.

According to the Davis administration, the governor’s plan would let Edison, PG&E and the state’s third investor-owned utility, San Diego Gas & Electric, to make a total of $8 billion in debt payments over a decade.

Davis’ plan would shift the burden of the PUC rate increase to heavier residential, commercial and industrial power users while largely sparing agricultural users, who would only see increases of 5 to 15 percent.

”We are going to take the governor’s proposal under advisement and give it a lot of weight, I suspect,” PUC Commissioner Carl Wood said, adding that the commission will seek input from consumer groups and businesses before making a final decision.

The three utilities say they have lost more than $14 billion since June due to soaring wholesale power costs. More than $13 billion of that comes from Edison and PG&E, who have been barred under the state’s deregulation law from recovering the rising costs from their customers.

Davis – facing mounting pressure from Republicans and fellow Democrats to resolve California’s energy crisis – delivered the speech from behind a desk, with his hands clasped in front of him.

He assured residents that the state would survive the crisis.

”We are Californians. We’ve withstood earthquakes, floods, fires and droughts,” Davis said. ”Yes, this is man-made, but with your help and God’s blessing, we’ll get through this as well.”

He said he would stand by his plan to help restore the utilities to financial health by negotiating state acquisition of their transmission lines and requiring them to sell low-cost power to the state for a decade and drop their lawsuits seeking to double their electric rates.

Davis urged Californians to help cut power use 10 percent to fend off rolling blackouts this summer, when residents will crank their air conditioners and demand will rise sharply.

The Legislature on Thursday afternoon sent Davis proposals that would spend $1.1 billion on conservation programs for consumers and businesses. Davis plans to sign the measures.

He listed actions he has taken to try to solve the power crisis, including negotiating long-term contracts to purchase power and buy the utilities’ transmission lines.

Davis also said he has cut red tape and provided incentives to speed power plant construction after a decade with none built.

”We can’t fix 12 years of inaction overnight. But we’re making real progress,” he said.

The speech, the first such message Davis has delivered besides his annual State of the State address, comes as the GOP and even fellow Democrats criticize the governor’s handling of the crisis.

Consumer groups, angered by the rate increases, are promising a revolt at the polls in 2002, planning to roll back the rate hikes through an initiative that would share the ballot with Davis, who is up for re-election then.

Consumer advocate Harvey Rosenfield said Davis is failing to protect utility customers. He compared power suppliers to blackmailers charging an ”extortionary price for electricity.”

”Nothing the governor has said tonight will do anything to stop the profiteers,” said Rosenfield of the Foundation for Consumer and Taxpayer Rights in Santa Monica.

Power supplier Duke Energy said it has done nothing wrong and doesn’t deserve criticism for the wholesale prices.

”We are running our power plants at historically high levels to keep consumers’ lights on,” Duke said in a written statement.


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