Governor wants utilities to halt sell-off of facilities

The Associated Press
Saturday December 02, 2000

SACRAMENTO — Gov. Gray Davis said Friday that utilities should be barred from selling off any more power plants and dams until California’s turbulent wholesale electricity market smooths out. 

The Democratic governor, reiterating his earlier testimony before the Federal Energy Regulatory Commission, also asked federal authorities to order consumer refunds, new wholesale price controls and strict conservation measures in response to the state’s skyrocketing electricity prices. 

And he said he wanted a speed-up in the state Public Utilities Commission’s investigation into electricity use, among other things. 

Davis’ long-awaited announcement provided little new information about his strategy to deal with the state’s burgeoning electricity problems. He said his plan was a work in progress largely dependent on action by state or federal authorities. 

His comments were contained in a letter to the FERC, which sought Davis’ input before issuing a final order Dec. 13 targeting California’s electricity market. 

“If you do your job of protecting consumers by rectifying wholesale markets, the steps I have to take can be transitional in nature and limited in scope,” the governor wrote FERC. 

The state has been roiled for months by price spikes and power shortages. In San Diego, ratepayers reported a doubling and tripling of their bills following deregulation of San Diego Gas & Electric Co. prices. 

Davis was in Mexico Friday attending swearing-in ceremonies for newly elected Mexican President Vicente Fox. The governor’s proposals were released by his office at a meeting that included Loretta Lynch, the head of the Public Utilities Commission. 

Davis’ letter was noteworthy for what it did not mention, including several hot-button issues that have been discussed at length within the administration. 

Those include evenly dividing the estimated $6 billion in excessive wholesale energy charges between ratepayers and utilities, establishing public ownership of California’s electrical grid and creating a new state electricity agency. 

“He hasn’t ruled it in, he hasn’t ruled it out,” said Davis spokesman Steve Maviglio, referring to the $6 billion division. “The governor is looking at many options here. There is no silver bullet. We are continuing to review ideas.” 

Maviglio said the administration wants to wait until after FERC issues its final order, and then intends to develop legislation for next year’s session of Legislature. 

But the author of a potential 2002 ballot initiative to reregulate California’s electricity industry said Davis’ announcement was “a tremendous disappointment.” 


“There is a leadership vacuum in the state of California in the face of an electricity crisis that is going to become a catastrophe. The governor is waiting for a federal agency to solve the problem,” said Harvey Rosenfield, head of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. 

Davis’ recommendation to halt the sell-off of power-generating assets could close a loophole in California’s 1996 deregulation law, said Sen. Debra Bowen, D-Marina del Rey. 

The law phased-in a plan to allow investor-owned utilities — San Diego Gas and Electric Co., Pacific Gas and Electric Co and Southern California Edison Co — to sell off assets and buy power on the open market by March 2002. SDG&E, with 1.2 million customers, completed its transition to a deregulated market last summer. 

PG&E and SoCal Edison both operate under a rate freeze, and both have sought to lift the limits. Spokesmen for both utilities declined to discuss Davis’ sell-off proposal. Between them, the companies have 9.7 million customers. 

A disputed section of law allows investor-owned utilities to remove their rate freeze once their power-generating facilities are sold off, or the facilities’ appraised value is approved by the PUC. 

Davis’ proposal then potentially could halt that procedure and delay possible rate hikes by PG&E and Southern California Edison. 

It would take new legislation to bar utilities from disposing of remaining power facilities, said Bowen and Lynch. 

“The way the staute is written, at least the valuation of PG&E’s hydro-electric assets could allow their transfer to a nonregulated subsidiary. So, I’m pleased to see this. I think it’s a loophole that is going to be closed,” Bowen said. 

The deregulation issue is so complex, Bowen added, that regulators, consumer groups and elected officials have to be cautious in deciding fixes. 

“It’s stort of like attempting to disarm a nuclear bomb. We really don’t want to go rushing in with a pickax and power saw. We need to be cautious. We don’t want to make things worse for people,” Bowen said. 


On the Net: Read the letter at www.governor.ca.gov.