Features

The Associated Press 

SACRAMENTO — The governor signed a $10 billion power-buying plan Thursday aimed at keeping California’s lights on while lawmakers try to fix its deregulation-induced energy crisis. 

The law, which took effect immediately, lets the state sign long-term contracts to buy power and sell it to the customers of financially ailing Southern California Edison and Pacific Gas and Electric Co. 

“This bill before me marks the first critical steps on the road to recovery from California’s energy crisis,” Gov. Gray Davis said. “With the signing of this bill today I’m assuring everyone that California can and will pay its bills.” 

Davis, heading to Oregon for a meeting with Western governors on the expanding power problems, said the new law will calm wholesale markets “and give the signal that California is gaining control over this challenge.” 

Davis signed the bill shortly after the Assembly approved it 54-25. 

The approval – achieved after hours of vote-scrounging that even saw a state plane sent to fetch a sick lawmaker from his home – came despite GOP protests that the bill will mean higher costs for consumers. 

California’s two largest utilities, which serve nearly 9 million residential and business ratepayers, say they’ve been pushed more than $12.7 billion into debt by the state’s disastrous 1996 deregulation law. 

The law required them to sell their power plants and buy wholesale electricity, but blocked them from raising rates to cover their costs as wholesale power prices soared over the past several months. 

The legislation lets the state spend up to $500 million more buying electricity on the expensive spot market – where California has been spending $40 million to $50 million a day – while reaching cheaper long-term deals with wholesalers for up to a decade. 

Davis said he wanted contracts signed by Feb. 5. 

Several Assembly Republicans took issue with a provision that would let the state Public Utilities Commission raise electricity rates to repay the state for its power purchases. 

To encourage conservation, residential customers who use 30 percent more energy than a baseline specified by regional climate and energy use would be punished with higher rates. 

“It is an unlimited rate increase and there’s no question about that,” said Assemblyman Rod Pacheco, R-Riverside, who voted no. 

The Assembly rejected the measure earlier Thursday, falling three votes short of the two-thirds needed. The Senate approved it Wednesday. 

The state has spent more than $500 million since mid-January on costly short-term power-buying on behalf of Edison and PG&E, both denied credit by suppliers. 

The Assembly’s action came on California’s 17th straight day in a Stage 3 power alert, with reserves threatening to fall below 1.5 percent.  

The northern two-thirds of California had two days with rolling blackouts last month as electricity fell short. 

California’s energy problems – driven by high wholesale prices, high demand and a tight supply – are expected to persist through the summer. 

The long-term buying bill, funded through $10 billion in revenue bonds, is part of a larger fix being orchestrated by lawmakers. 

Another proposal would let the state issue revenue bonds to help the utilities pay off their debts.  

It would be paid back by Edison and PG&E customers and through utility stock options the state could sell as their value rebounded. 

Lawmakers also want speedier power plant construction and more energy conservation. 

Davis on Thursday issued an executive order that, effective March 15, requires all California retailers, including shopping malls, stores, auto dealerships and restaurants, to substantially cut outdoor lighting during nonbusiness hours. Those who refuse could be hit with $1,000-a-day fines. 

The Democratic governor, accused by many GOP and even some Democratic lawmakers of not doing enough to address the energy crisis, described his $404 million conservation program as “the most aggressive in America.” 

It includes a media campaign, $75 million in incentives for consumers to upgrade to more energy-efficient appliances, $95 million for businesses to install energy-saving equipment and lighting, plus funding to cut consumption during peak periods and increase state government’s energy efficiency. 

While the state moved to boost the energy supply, PG&E took action to address its debts. 

The San Francisco-based utility notified the Securities and Exchange Commission that it cannot pay more than $1 billion owed for power bought on the open market and sold at lower, regulated prices. 

The debts included $611 million owed to the state Power Exchange and to the Independent System Operator, keeper of the state’s power grid, plus $437 million owed to qualifying generators. 

PG&E notified suppliers that it could only make partial payments totaling $161 million. 

The company said it also has defaulted on $437 million in commercial debt. Its creditors have terminated agreements to loan the utility more money. 

The company reported that since summer, it has racked up at least $6.6 billion in high wholesale electricity costs the deregulation law blocks it from recouping from customers. 

SoCal Edison is expected to make a similar SEC filing Friday. 

Meanwhile, a division of Houston-based Enron Corp. said it will stop providing power directly to large California industrial customers, such as Cisco Systems, and switch them to PG&E. Enron said Thursday that it wouldn’t raise their rates. 

Enron has long-term contracts with several dozen customers to provide energy at low rates. To fulfill those contracts, Enron says it was forced to buy energy on the wholesale market at skyrocketing prices. 

On the Net: 

Read the legislation, AB1X by Assemblyman Fred Keeley, D-Boulder Creek, at www.assembly.ca.gov 

California ISO: www.caiso.com