SACRAMENTO — State Treasurer Phil Angelides said Thursday that delays by the California Public Utilities Commission mean the state won’t issue $12.5 billion in energy bonds to repay the state general fund until next year.
Any more delays could cause a $9.3 billion deficit in the next fiscal year, Angelides said.
California has spent nearly $9 billion buying power since January, when three utilities, who had amassed billions in debt, could no longer buy electricity for their customers.
“This state started this year in very tough times,” Angelides said. “To keep the lights on, the state lent its nest egg, money intended for education, health care services, programs for the poor and basic services of state government. It’s time to pay that money back.”
Before the state can sell the bonds, however, the PUC must approve two agreements, one which would set the initial portion of utility bills that will go toward repaying the state, the other to allow the state to raise electric rates if it isn’t collecting enough to repay the debts.
To make the bonds appealing to buyers, there must be a guarantee that some part of customers’ rates will be dedicated toward repayment, Angelides said.
But energy regulators have delayed voting on the agreements with the Department of Water Resources, the state agency charged with buying enough electricity to supply the utilities’ customers.
PUC Commissioner Richard Bilas and other commissioners have said they aren’t happy about potentially giving up the PUC’s right to scrutinize how the state is spending ratepayer dollars and how high it could raise electric rates.
“I think there are a lot of problems with the agreement,” Bilas said. But it may be the best the state can do and “you’ve got to trade that off against the fiscal integrity of the state.”
After the PUC approval, it will take at least 60 days to arrange the bond sale, Angelides said, but a legal challenge could extend that timeline. The PUC is now set to vote on the issues Tuesday.
“I see no way these bonds could be sold this year,” Angelides said.
Without paying the state back by the 2002-03 fiscal year, the state will be short $9.3 billion, which would require cutting about 18 percent of California’s non-education spending, Angelides said.
Such a shortfall would resemble the deficits of the mid-1990s, when the state raised taxes and made deep spending cuts, he said.
The rate agreement has been stalled while the PUC examines an alternative plan for the bonds approved by the Legislature.
That plan, proposed 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 the energy bonds. It would also limit the use of the bond money to cover electricity purchases and legislatively approved administrative costs and would require public hearings before the DWR could raise consumer rates to cover power purchases.
Burton said there’s a consensus that his plan would save $1 billion and “make it easier to sell the bonds. Earlier this year, the treasurer endorsed splitting the bond payment, rather than giving carte blanche to the DWR.”
Consumer advocate Jamie Court of the Foundation for Taxpayer and Consumer Rights also supports Burton’s plan, saying it would stop DWR and Gov. Gray Davis from having a “blank check” for power deals.