http://www.channel2000.com/news/stories/news-79919820010531-230550.html

Governor Says He's Prepared To Seize Power

Davis Tells City-Owned Utilities To Sell Cheap Or Else

Paul J. Young, Staff Writer

May 31, 2001, 10:17 p.m. PDT

LOS ANGELES -- When it comes to power, Gov. Gray Davis doesn't play around.

During a stop in Los Angeles Thursday, the governor again affirmed how serious he is about using the authority of his office to guarantee that all available electricity in the state is redistributed to try to prevent rolling blackouts.

There's been some question lately about whether the state's sundry municipal power generators will agree to provide their electrical surpluses this summer at the rates desired by Davis and state officials.

The governor recently told The Chronicle that municipal -- city-owned -- utilities have been as bad or worse than out-of-state generators in charging usurious prices for megawatts.

"I was very disappointed to learn that they were charging us more for power than the [out-of-state] power suppliers," Davis said.

It's estimated that so far this year, well over $8 billion dollars in taxpayer money has been spent by the state to purchase megawatts for the financially crippled investor-owned utilities.

The governor and state Energy Czar S. David Freeman have been negotiating long-term contracts with power generators that would assure the acquisition of electricity at fixed rates.

According to the Chronicle, the contracts will end up draining nearly $40 billion out of the state budget.

The governor and state energy officials are looking to municipal power generators to sell their surplus electricity cheap for the duration of the power crunch.

But it's uncertain whether the cities will agree to provide megawatts when it's not profitable.

"They're supposed to provide power on a cost of service basis," Davis told CBS 2 News Thursday.

"They're not supposed to make a zillion dollars by charging us more than these out-of-state generators, who've set the Guinness Book of Records for greed themselves, but munies are doing even more."

Among those Davis accused of overcharging the state is the Los Angeles Department of Water and Power.

But Mayor Richard Riordan shot back Thursday, saying that, if anything, the DWP has been generous, considering that it's still owed $180 million for wattage sold to keep the juice flowing in California.

"L.A. DWP sells lowest cost power to the city's own customers by law," Riordan told CBS 2 News. "What we're selling to the state is our most inefficient and our most expensive to produce.

"We're making far, far less profit than anybody else. We've limited our profits to 15 percent and will continue to do that."

According to The Chronicle, Davis is prepared to seize up to 800 megawatts of output (enough to light 800,000 homes) from municipal generators if their prices don't come down.

He's giving them two weeks to lock in low-cost rates with the state.

"But if they don't go through with contracts, I'm going to seize the power," Davis told CBS 2 News.

Both of L.A.'s mayoral candidates vowed to fight any move by Sacramento to forcibly take power generated in Los Angeles.

"I don't believe that the state should step forward, and I'll fight that" former Assembly speaker Antonio Villaraigosa said Thursday.

City Attorney James K. Hahn said that the governor's approach is wrong.

"I don't think the governor, the state legislature who created this mess ought to be trying to blame people in Los Angeles for this," Hahn said.

-- (in@energy.news), June 01, 2001

Answers

Rolling on the floor!!!!!

Davis is being taken advantage from both the left and the right. What a loser.

-- libs are idiots (moreinterpretation@ugly.com), June 01, 2001.

Published Friday, June 1, 2001, in the San Jose Mercury News

City utilities resent Gov. Davis' threat SMALL POWER PROVIDERS COMPLAIN ABOUT SUBSIDIZING STATE BY JOHN WOOLFOLK Mercury News

City-run utilities Thursday called Gov. Gray Davis' threat to seize their electricity a theft of public property that could force higher rates on their customers to subsidize the state's deregulation failure.

Municipal utility officials, including those in Santa Clara, Palo Alto and Alameda, said they already have needlessly suffered rolling blackouts and higher costs from a deregulation scheme they didn't even join.

They called Davis' threats and accusations of price-gouging outrageous.

``It's not only untrue, it's unfair,'' said Matt McCabe, spokesman for Alameda Power and Telecom, the city of Alameda's utility. ``It's not like we're raping and pillaging other electricity customers. We've worked very hard to do our part to support the state's electric system.''

Davis spokesman Steve Maviglio said the governor may use his executive authority to seize surplus power from municipal utilities that don't agree to sell to the state in contracts based on production costs. Davis has accused municipal utilities of charging even more than the Texas energy companies he accuses of price gouging. He threatened to seize their power in an interview Wednesday with the San Francisco Chronicle.

``The governor does not believe municipal governments should profit from a crisis affecting every other citizen of the state,'' Maviglio said. ``We're not asking them to take a loss. We're asking them to be reasonable.''

But Jerry Jordan, executive director of the California Municipal Utilities Association, said only the largest city-run electric company has any real surplus power.

No guaranteed surpluses

The rest often have daily surpluses that they sell on the wholesale market, but usually have to buy more than they sell throughout the year, Jordan said. With market prices soaring, that translates to net losses and often rate increases for many of them, he said.

``We're getting hurt by this market just like everybody else,'' Jordan said.

Palo Alto customers will see their rates jump 43 percent in July to cover rising power prices, said Director of Utilities John Ulrich. Customers in Sacramento, Redding, Burbank and other cities also have experienced higher rates, Jordan said. Other municipal utilities, including Santa Clara, Alameda and Los Angeles, haven't had to raise rates so far.

Angry at Los Angeles

The singular exception, and the focus of Davis' wrath, appears to be the Los Angeles Department of Water and Power, the state's largest municipal utility. That utility has about 1,000 megawatts more than its customers need, enough for about 1 million homes.

The department made $240 million selling on the state's Power Exchange. Ironically, its general manager at the time, S. David Freeman, is now Davis' energy chief.

But spokeswoman Darlene Battle said the utility didn't set the market prices it was paid. Under the Power Exchange's rules, all sellers were paid the highest price offered, regardless of what each had bid.

Since the Power Exchange folded in February, the LADWP has been selling surplus power to the state at a 15 percent markup over its production costs, Battle said.

Call for lower markup

But Oscar Hidalgo, spokesman for the state Department of Water Resources, the agency buying the state's power, said the LADWP three weeks ago started charging the state higher market rates except during emergency shortages. The state wants Los Angeles to sell its surplus at cost-based rates all the time, and at a lower 8 percent markup, he said.

Davis officials could not name another California municipal utility with a consistent surplus. But Hidalgo said the state is looking to see whether others have more surplus power than they say.

Either way, municipal utilities say their electricity belongs to their citizens and that giving it to the state at a loss would constitute an illegal gift of public funds. They say their sale proceeds protect customers from rate increases and don't enrich shareholders.

``This generation was paid for by the citizens of Los Angeles,'' Battle said. ``I think it's unfair that we're being asked to make our customers subsidize the state.''

---------------------------------------------------------------------- ---------- Contact John Woolfolk at jwoolfolk@sjmercury.com or (408) 278-3410.

-- libs are idiots (moreinterpretation@ugly.com), June 01, 2001.