California Gov. Gray Davis “delivered” on his plan to buy outthe transmission systems of the financially-troubled investor-ownedutilities in the state Friday, outlining the framework of a deal,but with no dollar signs attached and no on-the-record agreementswith the utilities.
The plan is a “buyout, not a bailout,” the governor said and heclaimed there would be no increase in utility rates to carry outthis proposal. The governor’s announcement late Friday came at theend of another week marked by continuing short power supplies,court and regulatory actions surrounding the power shortage andinsolvency of Southern California Edison and Pacific Gas &Electric.
Also on Friday, President George W. Bush ordered five federalagencies to speed up the permitting process for the siting andoperation of power generation facilities in the state. “The federalgovernment should make every effort to work with California and tohelp its citizens” during the current power crisis, he said.
The governor said high-level negotiations are on-going topurchase the transmission systems of the three IOUs, representingabout 60% of power lines in the state. He expects to have somethingto announce early this week in terms of the progress of thosetalks. He claimed two of the three CEOs for the major privatesector utilities are in favor of selling the transmission system,assuming a mutually acceptable price above book value can be agreedupon.
The governor’s plan, if eventually carried out in new laws andregulatory policy, could shackle the state’s investor-ownedutilities for years to come and dampen private investment inCalifornia’s energy market, according to some observers. Others -particularly consumer advocates – think it places too much of theburden on utility ratepayers and/or state taxpayers.
“This is a balanced, fair transaction that is good for theutilities and good for the ratepayers,” Davis said, noting that hethinks 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 toraise 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 thegovernor’s plan include:
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