Davis Outlines State Buyout of Power Lines

California Gov. Gray Davis "delivered" on his plan to buy out the transmission systems of the financially-troubled investor-owned utilities in the state Friday, outlining the framework of a deal, but with no dollar signs attached and no on-the-record agreements with the utilities.

The plan is a "buyout, not a bailout," the governor said and he claimed there would be no increase in utility rates to carry out this proposal. The governor's announcement late Friday came at the end of another week marked by continuing short power supplies, court and regulatory actions surrounding the power shortage and insolvency of Southern California Edison and Pacific Gas & Electric.

Also on Friday, President George W. Bush ordered five federal agencies to speed up the permitting process for the siting and operation of power generation facilities in the state. "The federal government should make every effort to work with California and to help its citizens" during the current power crisis, he said.

The governor said high-level negotiations are on-going to purchase the transmission systems of the three IOUs, representing about 60% of power lines in the state. He expects to have something to announce early this week in terms of the progress of those talks. He claimed two of the three CEOs for the major private sector utilities are in favor of selling the transmission system, assuming a mutually acceptable price above book value can be agreed upon.

The governor's plan, if eventually carried out in new laws and regulatory policy, could shackle the state's investor-owned utilities for years to come and dampen private investment in California's energy market, according to some observers. Others - particularly consumer advocates - think it places too much of the burden on utility ratepayers and/or state taxpayers.

"This is a balanced, fair transaction that is good for the utilities and good for the ratepayers," Davis said, noting that he thinks the state legislators are all "basically on the same page," although not in agreement with every detail. Legislation, he said, should be passed in March to support the plan.

Amazingly at one point, Davis said that if he were willing to raise rates, "I could have solved this whole thing in 20 minutes," but he remains adamant against any further retail price increases.

Without an overall estimated price tag yet, elements of the governor's plan include: