Governor backs creation of public power authority |

Governor backs creation of public power authority

SACRAMENTO – Gov. Gray Davis urged a sweeping overhaul Monday of California’s beleaguered electricity system, including creation of a public agency to build power plants and a threat to seize the plants of wholesalers who gouge consumers or utilities.

Davis, in an annual address to the Legislature, called California’s power system deregulation ”a dangerous and colossal failure.”

”There is no easy solution. But, if I have to use the power of eminent domain to prevent generators from driving consumers into the dark and utilities into bankruptcy, then that’s what I’ll do,” Davis said.

”The time has come to take control of our own energy destiny,” Davis added.

Pacific Gas and Electric Co. and Southern California Edison Co. have lost $9 billion since June because rate caps have prevented them from passing increased wholesale costs to consumers.

Wholesale electricity prices have increased five-fold since June.

Davis’ speech contained his strongest comments to date on California’s electricity crisis. He pledged to set aside $1 billion in the 2001-02 state budget to stabilize the supply and price of electricity and provide new power generation.

Davis rejected suggestions from consumer groups that PG&E and SoCal Edison be allowed to go into bankruptcy

”Our fate is tied to their fate. Bankruptcy would mean that millions of Californians would be subject to electricity blackouts,” Davis said.

But he offered few details about his core proposal, the creation of public power entities. Nor did he discuss the use of state-backed bonds to finance the utilities’ expanding debt.

He demanded criminal penalties for wholesalers that withhold power from the California grid during emergencies, and authority to force idled power plants back into operation. Davis proposed adding 50 inspectors for the Public Utilities Commission, and said his emergency powers should be expanded in the event of power outages.

The Public Utilities Commission last week approved rate increases of 7 percent to 15 percent, but Wall Street and the utilities said it was inadequate.

Fiscal analysts say more rate hikes – or some other form of new revenue – is needed for the investor-owned utilities, which serve 25 million people.

”We have to be able to restore in the minds of the financial community the credit-worthiness of California and its public utilities, or will not have the ability to borrow the money to keep the lights on,” said Tom Higgins, a senior vice president of SoCal Edison.

The company, along with PG&E, said it faces insolvency in weeks unless it obtains more money.

A consumer group that favors public ownership of California’s electricity system said SoCal Edison was not in financial jeopardy.

The Foundation for Taxpayer and Consumer Rights said SoCal Edison’s parent company, Edison International, had $37.9 billion in assets, according to the company’s filing with the Security and Exchange Commission.

Davis and other state officials believe the prices have spiked largely because profiteering wholesalers have exploited flaws in California’s deregulated electricity market.

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