Editorials

SACRAMENTO – Gov. Gray Davis urged Californians Tuesday to save electricity and called for the construction of new power plants. But he said he wouldn’t offer his plan to deal with the state’s electricity crisis until Jan. 8 – four days after state regulators decide how much to boost ratepayers’ bills. 

The Democratic governor signaled his continued support for deregulation, while noting that there are problems and “we have to move on several fronts so that down the road deregulation can work.” 

The governor, in an interview in Washington, D.C. with Nightly Business Report, said the state Public Utilities Commission had the principal authority to take action to soothe California’s deregulated energy market, which has been rocked by shortages and spiraling wholesale electricity costs. 

“The PUC is the legal body that will make a determination,” the governor said. When asked what he thought the PUC should do, he said: “It doesn’t matter what I think.” 

“There are no magic bullets. We just have to work our way through this problem,” Davis added. 

The interview was significant for what he did not say. 

The governor did not mention that the PUC is composed of gubernatorial appointees, and that within a week he will have the authority to appoint another member of the five-member panel, giving his appointees a majority. 

He said wholesale power sellers are driving the current crisis, but he did not discuss potential penalties, whether the wholesalers should provide refunds to the utilities, pay taxes on their profits or to what degree utilities should shoulder the burden of high energy costs. 

He has said ratepayers will need to bear some of the costs of protecting the utilities’ solvency, but he did not give specifics and did not discuss his private negotiations currently under way with the utilities in Sacramento. 

Earlier in the day, Davis said he met for two hours with Federal Reserve Chairman Alan Greenspan and U.S. Treasury Secretary Lawrence Summers about the economic implications of California’s electricity problems. He did not provide details. 

A spokesman for a consumer group that favors reregulating California’s electricity market, deregulated by a 1996 law, said Davis was “passing the buck at every turn, seeking to distance himself from rate hikes that will be pinned on him.” 

“It all comes down to Davis. He is the one setting up the meetings with the utilities, he has the authority to appoint the PUC majority, he could step in,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. 

The PUC earlier declared that California’s two huge investor-owned utilities, Pacific Gas and Electric Co. and Southern California Edison Co., needed rate increases to help cover some $8 billion in losses they’ve incurred since June. 

The scope of that increase remained uncertain, however, as PUC-hired auditors were examining the companies’ books. 

The two utilities, serving a total of 10 million homes and businesses, have paid sharply higher prices for wholesale electricity, but because they operate under a rate freeze they have been unable to pass those costs on to their customers. 

The PUC plans to meet Jan. 4 in San Francisco to decide on lifting the rate freeze. On Jan. 8, Davis said he will unveil in his State of the State address to the Legislature his suggestions to deal with the crisis. 

One of the Legislature’s ranking Democrats said the state could purchase PG&E’s and SoCal Edison’s hydroelectric dams, valued at more than $4 billion, which he said would help the utilities stave off insolvency and protect ratepayers from huge high bills.