Davis Tackles Electricity Problems

Gov. Gray Davis ordered a series of modest steps Friday to ease California’s electricity crisis and warned federal energy regulators that more drastic action has not been ruled out to guard consumers against soaring electricity bills.

The governor, who was in Mexico on Friday for the inauguration of President Vicente Fox, outlined in a letter to federal energy regulators his plans to free utilities to contract for electricity this winter so they can avoid next summer’s expected price spikes, and to create a program that pays factories to shut down before power consumption on hot days sends prices soaring.

The measures described by the governor to the Federal Energy Regulatory Commission are simply first steps, Davis wrote. A complete plan will come after the commission issues critical decisions about California’s energy market, including whether to force private power plant owners to return profits to consumers and utilities for the electricity prices they paid last summer. The decision is expected by the end of the year.

The federal commission’s once-obscure role as regulator of wholesale electricity prices assumed great importance in California after the state launched deregulation in 1998 and eliminated much of its own control over prices.

The lifting of regulation in favor of competition was supposed to bring lower electricity rates, but utilities and consumers have paid several billion dollars more for electricity this year than last. Market prices last month were more than three times higher than they were in November 1999.

A resulting backlash threatens to undo deregulation. Consumer groups announced this week that they may put a ballot measure before voters in 2002 to bring back regulation and expand public ownership of power plants. Steve Maviglio, the governor’s spokesman, said Davis might support such a measure.

In his letter, the governor repeated much of what he demanded of the federal commissioners in a San Diego hearing last month. He argued that the agency holds the authority to order rebates and asked commissioners to impose a rigid cap on wholesale electricity prices. He described recent actions taken by California to alleviate a power shortage, noting that five power plants are under construction and a new “green team” of environmental regulators is working to streamline the location and operation of plants.

Jan Smutny-Jones, who represents power plant owners as executive director of the Independent Energy Producers Assn., welcomed the governor’s direction to the California Public Utilities Commission to speed up and standardize its review of long-term contracts between utilities and power sellers. Power plant owners are now offering electricity under contracts of a year or more for prices well below the price cap the governor has suggested.

But the utilities commission has hesitated to approve such contracts for fear that the utilities and their customers will be obligated to pay too much if the price of electricity drops after a year or so.