Failure to Buy Entire Network May Doom Davis’ Power Deal
Does it make sense for California to own only part of the state’s power grid?
That question is dividing state legislators and energy experts after Gov. Gray Davis’ announcement of a $2.76-billion deal to buy Southern California Edison’s transmission lines. The deal was reached Monday, three days after Pacific Gas & Electric Co. balked at selling its power lines to the state and filed for bankruptcy.
Davis and Democratic legislators have pushed to purchase the whole transmission system owned by the state’s debt-saddled private utilities. They reason that by owning the highway that electricity must travel to reach homes and businesses--a 32,000-mile web of wire that is the world’s fifth-largest coordinated power grid--the state would gain a negotiating advantage with the companies that produce the power.
If California’s transmission grid were entirely owned by the public, political leaders believe, the state could gain jurisdiction over key electricity issues now decided by the Federal Energy Regulatory Commission, which has been reluctant to intervene in the energy crisis. The state, not the commission, could then set its own transmission fees and control the flow of electricity across the grid.
Transmission charges bring in roughly $1.4 billion a year for the three utilities. With that money, the state could not only repay itself for the purchase of the power lines but also fund system upgrades to unclog electricity bottlenecks that contribute to blackouts.
“Owning the wires is a business, and this business operates at a profit,” said Assemblyman Roderick Wright (D-Los Angeles), who will head a series of committee hearings on the plan to buy the Edison lines. “We’re not going into their yards and buying old trucks or something; we are buying a vital piece of their electrical system.”
However, now that Pacific Gas & Electric has opted to try to find a solution to its debt problem in Bankruptcy Court rather than continue negotiations with the state, the prospects of California acquiring the entire system appear uncertain at best.
That is generating concern about what California is getting for its money--and whether the state stands a chance of gaining any independence from federal regulators--if it buys only the lines of Edison and San Diego Gas & Electric.
The Edison deal, which needs legislative approval, is unlikely to garner a single vote from Republicans--Assembly Republican leader Dave Cox (R-Fair Oaks) calls the grid purchase a socialistic idea. The plan may also encounter some Democratic opposition.
“It was a tough sell to begin with, and I think if you are going to only buy part, it becomes a tougher sell,” said Assemblyman Dean Florez (D-Shafter).
And some utility experts say California gains little, if anything, unless it acquires the whole system.
“The motivating factor for buying the grid, as opposed to hydroelectric power plants, is because it addressed the central problem facing California: The federal government is unwilling to crack down on the generators that are ripping us off, and we need to take back control,” said UC Irvine professor Peter Navarro. “If you only buy 40% of the system, you might as well have nothing.”
California would not be able to make some of the most critical upgrades needed to improve the flow of electricity if it did not acquire PG&E;’s portion of the system. The worst energy bottleneck in California is the notorious Path 15, a series of high-voltage lines that move power between Southern and Northern California. Path 15 lies largely in PG&E;’s territory.
Davis and some state legislators say California still has a chance to buy the entire grid. Some, in fact, believe that the utility’s bankruptcy increases the likelihood of a deal: Talks between Davis and PG&E; had faltered in recent weeks, and a judge may have better luck bridging their differences.
Negotiations between the state and San Diego Gas & Electric continue, leaving the possibility of a deal with that utility.
But acquiring PG&E;’s portion, the largest and most important by far, now requires the approval of a federal Bankruptcy Court judge. And in that arena, the state may have to compete with private companies for the lines.
Trans-Elect, a Washington company that wants to create a national network of independently owned transmission lines, has offered to buy and operate the grids of Edison and PG&E; for a total of $5.25 billion. The company has also been in contact with the Davis administration on the possibility of leasing the lines from California if they are bought by the state.
For the state to buy any of the systems, it needs approval from FERC--far from a sure thing. The commission in recent years has encouraged states to put management of large sections of the nation’s transmission grid into private hands to achieve more efficient electricity flow. Even if the commission approved the purchase, the state may not receive any increased powers.
“FERC would like to see one large regional transmission system in the West,” said David Clement, a transmission expert with Cambridge Energy Research Associates. “If FERC were to unconditionally approve the sale, then the transmission system owned by Edison would leave FERC authority. However, FERC could easily condition the sale such that the transmission grid remains under their authority.”
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The California Grid
Electricity is moved throughout the state on a 32,000-mile network of power lines carrying current at up to 500,000 volts. The electricity is “stepped down” in a series of substations and transformers for different levels of use in industry and in homes.
PATH 15: Energy bottlenecks sometimes occur on Path 15, a critical group of high-voltage lines that move power between Northern and Southern California. Congestion occurs when power demands exceed their transmission capacity of about 3,000 megawatts. Maintenance, accidents, vandalism and lightning strikes can also lead to bottlenecks.
Sources: California Energy Commission, California Independent System Operator
Researched by NONA YATES/Los Angeles Times
