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Californians Can Pay Now Or Pay More Later

Lawmakers Demand Probe Into Energy Bidding SACRAMENTO, Calif., 3:25 p.m. EST January 28, 2001 -- Consumers can pay higher power rates now or pay a huge financial price later, according to a report released Friday on California's power crisis. The report paints a dim financial picture for consumers should the state go forward with Gov. Gray Davis' plan.

The assessment of California's energy crisis came from a group of top economists including two Nobel laureates.

The group says that electricity has become a political commodity and that it's critical to avoid actions that will make the situation even worse.

In a position paper, 19 economists and business professors take on the governor's plan to handle the crisis.

They believe that the state running power plants and permanently buying power will make matters worse in the long run.

The group believes that solving the crisis means sharing the pain.

"It won't augment short-term supply but will discourage private investment and will saddle taxpayers with obligations for decades to come," University of California, Berkeley Prof. David Teece said.

Also Friday, Davis announced a deal with Mexico that would boost California's power supply.

"I thank the Republic of Mexico and its appropriate power agencies for agreeing to sell us power starting this Sunday. There going to make 50 megawatts available on a daily basis and put an additional 250 megawatts on the spot market. I'm going to call the President to thank him and the appropriate minister to thank him for helping us in our time of need," Davis said.

The deal could help California's power situation at least through February.

Meanwhile, a multibillion-dollar state-backed attempt to resolve California's electricity crisis prompted several lawmakers Friday to demand a probe into secret bidding procedures to learn how much taxpayer money, if any, would be at risk. Several Republicans said that Davis has released too little information about the bids the state is using to negotiate long-term contracts to buy power for the customers of cash-strapped Pacific Gas and Electric Co. and Southern California Edison.

As political wrangling intensified, power regulators called another Stage 3 power alert. The electricity grid's reserves were approaching just 1 percent, but blackouts were unlikely, they said.

The alert, prompted in part by the sudden loss of electricity imports from the Southwest, triggered power cuts to 1,200 selected businesses in Southern California. The companies agreed to the outages during emergencies in return for lower electric rates.

The state, its strapped grid stressed by high demand, uncertain imports, transmission problems and power plants idled for maintenance, has been under a near-continuous Stage 3 alert for the past two weeks.

SoCal Edison and PG&E, the state's two biggest utilities, say spiraling wholesale power costs in California's deregulated electricity have pushed them close to bankruptcy.

The investor-owned utilities, prevented by a rate freeze from passing the rising wholesale costs onto their customers, say they've lost $12 billion since June.

On Friday, the state continued negotiating long-term contracts to provide power to Edison and PG&E customers. The state received bids from 39 electricity suppliers during an auction this week.

The governor said he was pleased at the offers for long-term power, averaging about 6.9 cents per kilowatt hour during typical night and day use. The offers for the highest periods of power use were not disclosed.

The governor's office also declined to release details on the bidding, including the bids' range and origin.

"If we give you the range, it alerts the low bidders. Bidders could easily withdraw their bids. If we reveal the lowest bids, it is no longer secure and that results in higher prices," said Davis spokesman Steve Maviglio.

Assembly Minority Whip Tony Strickland, R-Camarillo, and several other GOP lawmakers asked for an investigation and public disclosure of the bidding.

He said withholding bidding information from the public could cloak the amount of money the state pays to secure electricity. The contracts could put the state into the power-buying business for as long as 10 years.

In other developments Friday:

The state Public Utilities Commission voted to let utilities continue asking businesses and others in the interruptible rate program to shut down during times of high demand even if the utilities - as in PG&E's case - have already reached their annual limit of such shutdowns. However, the PUC also temporarily suspended fines for customers who refuse to turn off electricity despite their agreements with the utilities to do so. PUC Chairwoman Loretta Lynch said such businesses - who get discounted rates in return for agreeing to the shutdowns - have borne a disproportionate burden during the state's power crisis. Commissioner Carl Wood voted for the suspension, in effect until further notice, but said it made rolling blackouts more likely until the state resolves its power crunch.

Lawmakers continued talks on a plan to issue state revenue bonds and extend consumer rate increases to help pay off the utilities' debt. A recently imposed rate increase of 7 percent to 15 percent would stay in effect for Edison and PG&E customers for up to a decade, and the state would have options to buy some of the utilities' stock at favorable prices as the companies' credit improved. Davis told CNN the plan "lets ratepayers know they will gain as the utilities gain." Consumer groups denounced it. It "adds insult to injury and amounts to a second utility bailout on the backs of consumers," said Janee Briesemeister of Consumers Union of Northern California.

Arizona Gov. Jane Hull met with Bush administration officials in Washington, telling them California's energy problems are starting to affect Arizona. While most major Arizona utilities are not being hurt by rising wholesale electricity prices because they have their own power plants, some smaller providers are because they buy their electricity. The San Carlos Irrigation District said Thursday its 13,300 customers' bills will rise by 300 percent next month. Phoenix-based Phelps Dodge Corp. warned it may reduce operations at three copper sites in Arizona and New Mexico where 2,360 people are employed. The company cited higher power costs as one factor. Federal Reserve Chairman Alan Greenspan said Thursday in congressional testimony that the California crisis threatens to undermine the country's economic expansion and the problem must be addressed "rather quickly."

Copyright 2001 by Channel 6000.

-- Martin Thompson (, January 29, 2001

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