Davis Approves $850 Million for Energy Conservation Plan

Gov. Gray Davis approved $850 million for stepped-up energy conservation efforts Wednesday after making good on threats to reduce the plan’s size, vetoing $250 million in items he said would not get results fast enough.

Calling the spending package “the most aggressive, most expensive conservation effort in America,” Davis depicted his signing of two conservation bills Wednesday as crucial in easing the state’s most immediate power pressures.

” “These are programs that Californians can use right now,” said Assemblywoman Christine Kehoe (D-San Diego), whose AB 29 was one of the measures.

The slimmed-down package provides $240 million to weatherize homes of low-income residents, plus millions for rebates on energy-efficient appliances, incentives for businesses that cut consumption, and public information campaigns.

The governor’s cuts included $25.2 million for efficiency programs at community colleges, $50 million for California Energy Commission loans and grants to small businesses to streamline refrigeration facilities, and $24 million to the Department of Corrections to retrofit generators.

Davis also axed a $15-million provision for a California Public Utilities Commission study of “real-time” metering, but he left in $35 million for the purchase and installation of meters that allow utilities to calculate bills based on when power is used.

Severin Borenstein, director of the UC Energy Institute in Berkeley, estimated that the funds would cover enough meters for businesses that consume more than 250 kilowatt-hours a day. Such devices, coupled with a rate plan, could encourage conservation by commercial customers during peak periods when demand--and prices--are highest, he said.

“It is reasonable to estimate that we could take 2,000 to 3,000 megawatts off peak usage this summer, which could save $1 billion,” Borenstein said.

Davis’ goal is to shave off at least 2,000 megawatts a day, enough to power 2 million homes. Experts estimate that the state faces an electricity shortfall this summer of 3,000 to 7,000 megawatts daily, depending on summer temperatures and hydroelectric supplies.

Conservation is only one prong of the state’s efforts to resolve its power crisis.

Davis and executives at San Diego Gas & Electric confirmed Wednesday that negotiations have intensified this week over state purchase of the utility’s transmission lines.

Completed deals with Edison and San Diego Gas & Electric could persuade the judge in PG&E;’s Chapter 11 bankruptcy case to order the Northern California behemoth to accept similar terms for its system, Davis said. Edison concluded a deal with the state Monday.

The governor performed a delicate balancing act at Wednesday’s bill-signing in response to a report, disclosed by The Times on Wednesday, that several public utilities, including the Los Angeles Department of Water and Power, joined private suppliers in helping to drive up wholesale energy prices in California last summer.

He defended the California Independent System Operator, which is using the report as evidence in its effort to persuade federal regulators to compel suppliers--public and private--to refund $6.3 billion to the state.

But he also defended the DWP, although it ranked eighth on Cal-ISO’s list of offenders for the period between May and November last year, reaping $17.8 million in allegedly excessive profits.

“The DWP sold us power, which is more than I can say for the [private] generators,” Davis said. He even thanked DWP General Manager S. David Freeman, who has acted as his chief negotiator in crafting long-term power purchase agreements with private suppliers.

“Yes, they took their markup, but they came through,” Davis said.

The chairman of a state Senate committee investigating alleged manipulation in the state’s power market said his panel will probe the activities of the public agencies as well as private marketers.

Though the initial focus of the investigation has been on five large out-of-state sellers, Sen. Joe Dunn (D-Santa Ana) said, “We always intended to look at some of the publicly owned [suppliers], such as DWP.” Dunn said Wednesday’s report “just reinforces” the need for the review.

Hearings will begin next week with an examination of recent studies, including the Cal-ISO report, of alleged efforts to inflate prices in the electricity market.

In other developments Wednesday, a U.S. District Court judge ruled that Enron Energy Services Inc., a unit of Houston-based energy giant Enron Corp., must continue to sell electricity to California universities under the terms of its existing contract.

The UC and Cal State systems signed a four-year contract with Enron in 1998, locking in discounted fixed rates. In February, Enron notified its commercial and industrial customers in California, including the universities, that their power would be supplied by Pacific Gas & Electric and Southern California Edison.

Enron said it will appeal the ruling to the U.S. 9th Circuit Court of Appeals in San Francisco.

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Times staff writers Julie Tamaki in Sacramento and Rich Connell in Los Angeles contributed to this report.