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SACRAMENTO — A bill that would require California’s power-buying agency to hold public hearings on billions of dollars worth of long-term energy contracts passed a key Assembly committee Thursday. 

The bill, by Sen. John Burton, D-San Francisco, would set aside part of existing consumer electricity rates to guarantee the state has enough money to pay off bonds issued by the Department of Water Resources. 

It also limits the use of the bond money to cover electricity purchases and legislatively approved administrative costs. Power-buying expenses and administrative costs would be reviewed by the Public Utilities Commission and the public to determine if it is appropriate to raise electric rates to pay for them. 

The changes will save ratepayers about $1 billion, Burton said, because it separates the bond repayment from other DWR activities “which under existing language could include everything and anything DWR does.” 

The Assembly Appropriations Committee approved the bill and sent it to the full Assembly. 

The PUC plans to vote Sept. 20 on whether to cede its ratemaking authority to the DWR. The proposed agreement would let DWR pass on all power costs to customers without oversight by state regulators to ensure those costs are fair and reasonable. 

DWR officials said they need that guarantee to attract investors when they sell $12.5 billion in revenue bonds this fall. Ratepayers will pay off those bonds over 15 years, and state officials say a solid revenue stream could help keep interest low. 

State Treasurer Phil Angelides said Wednesday that state regulators have to approve several measures, including the rate agreement for DWR, before it can issue the bonds. Angelides had planned to issue the bonds by October, but that date could be pushed back. 

PUC President Loretta Lynch supported Burton’s bill, testifying in an Assembly committee on Tuesday that it was a “clean and efficient way to make sure we get the bonds issued.” 

But Steve Maviglio, Gov. Gray Davis’ press secretary, said Davis had “a number of concerns” about the bill and wanted it amended. The bill’s ceding of some revenue authority to the PUC could make investors nervous about buying the bonds. 

Since January, DWR has spent more than $9 billion buying electricity for the customers of three financially ailing utilities. It will likely spend $43 billion to supply Californians with electricity over the next 20 years. 

The state is buying electricity for the customers of Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas & Electric Co. The utilities amassed billions of debt by January due to high wholesale prices last year, preventing them from buying electricity for their customers. 

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On the Net: 

Read the bill, SB18xx, at http://www.senate.ca.gov 

Read the DWR draft rate agreement at the California Public Utilities Commission Web site http://www.cpuc.ca.gov