Editorials

SACRAMENTO — With a $10 billion power-buying plan in place after two days of vote-wrangling, lawmakers prepared Friday for more contentious negotiations over what to do, if anything, about $12 billion in debts claimed by the state’s biggest utilities. 

Meanwhile, the state’s grid operators declared the highest power alert for the 18th consecutive day, due in part to the loss of about 8,000 megawatts because of power plants that were down for maintenance. 

The California Independent System Operator, keeper of the state’s power grid, extended a Stage 3 alert through Monday evening, said ISO spokeswoman Stephanie McCorkle. But no rolling blackouts were predicted. 

In another development, a Federal Energy Regulatory Commission report found that several California power plants were knocked out of commission in December because they are old and breaking down, rather than because generators shut them down to drive up prices. 

A second FERC report blamed high electricity prices in the Northwest on a combination of cold weather, short power supply from power plants failing to keep pace with growth during the last decade and a lack of rain and snow to fuel hydroelectric dams. 

Despite accusations from consumer groups that power producers were staging the outages to increase demand, FERC found that plants had legitimate reasons for being offline in December. 

“Staff did not discover any evidence suggesting that the audited companies were scheduling maintenance or incurring outages in an effort to influence prices,” the 55-page report concluded. 

Consumer advocate Harvey Rosenfield of the Foundation for Consumer and Taxpayer Rights contended that the FERC report was a “whitewash.” 

“The obvious question is what is different between this year and last year? In the dead of winter, when the state is using two-thirds of its total capacity, these power plants are falling off line at coincidentally the same time, provoking price increases and power outages,” he said. 

A spokesman for Gov. Gray Davis said the FERC report wasn’t a thorough study, with regulators visiting three California power plants and doing 60 percent of the audits by phone. 

“It seems to be, at first glance, to be a see-no-evil, hear-no-evil method of surveying,” said spokesman Steve Maviglio. 

Also Friday, Davis used his emergency authority to snap up power contracts before they could be seized by one of the debt-ridden utility’s creditors. 

With Davis’ move, the state was poised to make its first major acquisition of long-term contracts following approval Thursday of legislation allowing the state to spend $10 billion to buy power. 

The California Power Exchange, which is owed $215 million by Southern California Edison, had planned to seize all long-term contracts owned by the financially strapped utility. 

The contracts were collateral the PX wanted to sell because Edison defaulted on a payment for short-term power it bought on the exchange, said Jesus Arredondo, spokesman for the PX, which runs the state’s wholesale electricity market. 

But Davis beat the exchange to the punch, commandeering the contracts under the broad authority granted him under the Emergency Services Act. 

In a statement issued from Portland, where he was attending an energy summit with other Western governors, Davis said he was using his authority to “seize options to buy very inexpensive power that would otherwise be lost forever.” 

In other developments Friday, Reliant Energy sued the ISO in U.S. District Court in Washington D.C. after grid officials issued a letter demanding electricity producers sell to California, regardless of whether the utilities could pay. 

“Incredibly, the ISO’s basis for demanding that (Reliant) provide power ... is the fact that the utilities ultimately receiving the power will not be able to pay for it,” the lawsuit said. 

The long-term contract bill passed Thursday with the bare minimum of votes needed. Lawmakers say the next battle will be even more contentious — if and how the state should help So Cal Edison and Pacific Gas & Electric Co. pay off up to $12.7 billion in debts. 

The two utilities contend they have been forced to the brink of bankruptcy by skyrocketing wholesale electricity prices and state limits on how much they can charge their customers. 

Assembly Speaker Robert Hertzberg, D-Van Nuys, has introduced a bill that would aid the companies in exchange for their hydroelectric plants, transmission lines or an interest in the companies. 

But the first draft of the bill wasn’t met with any enthusiasm from lawmakers or consumer groups. 

“As it is, it is completely unacceptable. It really is a bailout, it gives the utilities their complete undercollection without much in return for the state,” said Sen. Debra Bowen, D-Marina del Rey. 

Richard Cortright, a utility analyst with Standard & Poor’s, a credit-rating agency, said the next step will be tricky because of the “political baggage” attached to plans designed to stave off bankruptcy. 

“It’s important for the utilities to avoid the tag ‘bailout.’ Obviously it has negative connotations. So there’s going to be some quid pro quo,” said Cortright. 

Ron Low, spokesman for PG&E, declined to comment on the ongoing discussions. Representatives from SoCal Edison did not return calls from the Associated Press seeking comment. 

Rosenfield said the long-term contract bill “was just the first shoe.” 

“Now the utilities want the ultimate bailout — the transfer of revenue to cover bad debts,” said Rosenfield. “For three years, deregulation was a financial bonanza for these companies, paid for by ratepayers. Now that they’ve lost money for three months, they want ratepayers to help them out.” 

——— 

On the Net: 

California Independent System Operator: www.caiso.com 

Pacific Gas and Electric Co.: www.pge.com 

Southern California Edison Co.: www.sce.com