California’s governor late Friday confirmed that the latestplans call for the state to demand the equivalent of stock optionsin its two largest investor-owned utilities, Pacific Gas andElectric and Southern California Edison, in return for the state’sproposed plan to spend billions of dollars in the next few monthsto help the two utilities avoid bankruptcy and to bring order toCalifornia’s increasingly chaotic energy markets, some of which hasbeen caused directly by the negative cash flow plaguing bothcompanies.

At a 3 p.m. PST press briefing in Sacramento, Gov. Gray Davismade it clear he intends “to secure for ratepayers an equity stakein the utilities.” Current proposed legislation in a specialemergency session of the state’s lawmakers (AB 18X) outlines someinitial proposals in this direction, along with establishingauthority for the state to sign long-term power supply contracts,thus becoming non-profit wholesalers to the state’s private andpublic sector utilities that choose to buy from the state.

In addition, Davis said the state has secured some supplies fromMexico — 50 MW directly each day and another 250 MW availabledaily on the spot market. There are several new and expandingelectric generation plants in north Baja California, south ofTijuana about 40 miles from the U.S. border. U.S. natural gassupplies increasing have been sold to the plants as they expandtheir capacity and new units are built.

The governor’s announcement on the state demanding an equityinterest is one of nine principles he listed as forming a “roughconsensus” for bipartisan legislation that is expected to be passedthis coming week.

Among the other items on the list are establishing a publicpower authority, streamlining the new power plant permittingprocess, reducing qualifying facility (QF) power supply contractswith utilities and continuing negotiations with utilities over theunrecovered wholesale power costs that currently approach $11billion.

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