California governor signs bill to buy power for utilities

In this story: Retailers, consumers asked to help State in power-buying business 'This is a pig in a poke' RELATED STORIES, SITES

SACRAMENTO, California (CNN) -- Gov. Gray Davis signed a $10 billion bond measure Thursday to ease California's power crisis shortly after announcing his new conservation plan aimed at keeping his state from going dark.

"I believe the solution to the energy challenge is threefold: stabilize prices, increase conservation and increase generation," said Davis, adding that the new bill was the best way to keep electricity prices from soaring higher.

VIDEO California Gov. Gray Davis announces his plan to conserve energy Play video (QuickTime, Real or Windows Media) Solar power can help California. CNN's Rick Lockridge explains Play video (QuickTime, Real or Windows Media)     IN-DEPTH SPECIAL Online coverage of the energy crunch in California   ALSO TIME.com: Bush to California: Thanks for the Urgency   MESSAGE BOARD Power crisis

The legislation passed Thursday afternoon will let the state sign long-term contracts for up to a decade to buy power and sell it to the customers of the state's two largest utilities, Pacific Gas and Electric Co. and Southern California Edison, which are teetering on the brink of bankruptcy.

The Assembly's 54-25 vote -- cast after legislative leaders and Davis won over a Democratic holdout and two Republicans -- came despite GOP protests that the bill will result in higher electricity rates. The bill had failed to pass earlier Thursday.

Davis signed the bill one day before he meets with other Western governors in Oregon to discuss the energy crisis that is threatening to spread from his state to theirs.

Meanwhile, Californians spent the 17th straight day of being under the highest level of alert, with rolling blackouts possible on short notice.

Retailers, consumers asked to help

While the legislative vote was under way, Davis held a news conference detailing his plan to conserve energy.

"I am mandating that by March 15th every retail establishment in this state substantially reduce their outdoor lighting," Davis said.

The governor said that under his emergency powers, he was asking members of the Law Enforcement Mutual Aid Organization to produce a plan in seven days that will cut retail electricity use in half without putting public safety or health at risk.

"Every time an unnecessary light is burning in a retail establishment, one more kilowatt hour could have sent to some other part of the state to avoid a blackout," he said.

Gray was also asking the public do its part and said a $20 million public service campaign would begin immediately, with a new " practical, simple suggestion" to air weekly. He played the first one, which asked Californians to do their laundry during only non-peak hours after 7 p.m.

The governor also announced $384 million would be used as additional incentives to "encourage consumers to trade in existing refrigerators and air conditioners for those that are more energy efficient. We will provide rebates every time they do."

Owners of buildings with energy-efficient lighting or building owners who install demand-reduction computerized systems also will be eligible for $95 million in incentives.

State in power-buying business

The bond measure passed Thursday effectively puts the state in the power-buying business, allowing it to negotiate long-term contracts and enter into agreements with power producers who submitted bids last week in an Internet auction process.

California Gov. Davis is using a three-pronged strategy to attack the state's power crisis

The state would then sell the power to its two largest utilities, which are facing bankruptcy, at lower rates than PG&E and SoCal Edison currently pay on the spot market.

The two utilities are California's largest and together serve nearly 9 million residential and business customers.

Forced by the state's 1996 deregulation law to sell their power plants, they say they've been pushed $12.7 billion into debt by soaring wholesale electricity prices. The law also includes rate caps that block them from recovering the higher costs from customers.

The state has already spent more than $400 million since mid-January buying power for the utilities, which have been denied credit by suppliers.

The legislation lets the state spend up to $500 million buying more electricity on the expensive spot market -- where the state has been spending $40 million to $50 million a day -- while reaching cheaper long-term deals with wholesalers.

'This is a pig in a poke'

The state will float $10 billion in revenue bonds, which will be paid back by utility consumers. That portion of the bill worried some lawmakers, who feared that could prompt rate hikes for consumers.

Republican legislators had asked to use $2 billion of the state's $7 billion surplus to offset those hikes, but that proposal was rejected.

Many lawmakers supported the bill reluctantly, using words such as "hate" to describe their feelings.

Several Republicans criticized a provision that will let the Public Utilities Commission raise electricity rates to repay the state for its power purchases.

"This is a pig in a poke," said GOP Assemblyman Rod Pacheco, who voted no. "It is an unlimited rate increases and there's no question about that."

California's energy problems -- driven not just by deregulation but high wholesale prices, high demand and a tight supply -- are expected to persist through the summer.

The northern two-thirds of California had two days with rolling blackouts in January as electricity fell short.

PG&E told the Securities and Exchange Commission on Thursday that it cannot pay more than $1 billion owed for power bought on the open market and sold at lower, regulated prices.

The debts included $611 million owed to the state Power Exchange and to the Independent System Operator, keeper of the state's power grid.

SoCal Edison is expected to make a similar SEC filing Friday.

The Associated Press contributed to this report.

Utility bailout falters in California assembly
January 31, 2001
Stage 3 power alert continues in California
January 30, 2001
White House forms energy task force, but offers California scant hope of aid
January 29, 2001
As lawmakers plug power holes, consumer groups decry 'bailout'
January 27, 2001
California governor: Bonds would produce power and cash for consumers
January 25, 2001

The California ISO
PG&E Corporation
SoCal Edison
  • Deregulation - What this means to you - Electricity Market Issues
California Power Exchange
System Conditions - The California ISO
California Public Utilities Commission
California Utilities Emergency Association

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