Davis says state will buy power

CRISIS: California would use its good credit to get lower long-term rates and resell to utilities.

January 13, 2001

By KIMBERLY KINDY The Orange County Register

Gov. Gray Davis said Friday that the state will be the buyer in any long-term electricity contracts that can be negotiated with power producers.

It would then resell the power to Southern California Edison and Pacific Gas and Electric, whose credit ratings are too weak to secure low rates on their own, he said.

"We are working with the legislative leadership to develop a plan to allow the state to either directly, or through guarantees, become a credit worthy purchaser," Davis said at a news conference.

The governor is hoping to buy energy for the state at roughly 5½ cents per kilowatt-hour in contracts lasting between five and 10 years. Energy producers are pushing for a rate of about 7 cents.

Consumer rates are currently set at about 7.5 cents for Edison customers.

Davis and legislative leaders will today take part in a teleconference with power producers and utilities in the hope of forging at least a tentative agreement on how any long-term contracts would work.

Soaring wholesale electricity prices forced Edison and PG&E to spend $12 billion more on power last year than they could pass on to consumers, whose rates were frozen. Some generating companies have refused to sell to the utilities, which have said they are close to bankruptcy.

One power generator said the state should be careful about locking in rates for too long, given that new plants are scheduled to come online.

"We believe in four or five years that the best solution will be a free and open market," said Bill Highlander, spokesman for San Jose-based Calpine Corp., which is scheduled to open two new California power plants next year. "Right now there is more demand than supply. It's Economics 101. But that is going to change."

http://www.ocregister.com/news/davis00113cci2.shtml

-- Martin Thompson (mthom1927@aol.com), January 13, 2001