Davis Says Electricity Costs Rose After PG&E; Bankruptcy
California’s average cost of buying electricity jumped 60% after Pacific Gas & Electric Co. filed for bankruptcy on April 6, Gov. Gray Davis said Tuesday as he tried to convince lawmakers that a utility bankruptcy harms the entire state.
The week before the utility sought protection from creditors in U.S. Bankruptcy Court, Davis said, the state spent an average of $45.8 million of taxpayer money buying electricity each weekday.
That average price increased to $57.4 million per day the week of the bankruptcy filing, he said, and last week the state spent an average of $73.2 million daily buying electricity on behalf of the customers of Pacific Gas & Electric, the utility arm of PG&E; Corp., and Southern California Edison Co., owned by Edison International.
Those figures do not include weekends, when demand for power slackens.
Davis said the bankruptcy filing has revived fears of power sellers that they will not get paid so they are charging the state increasingly more--a “credit penalty.”
But Gary Ackerman, executive director of the Western Power Trading Forum, said the price increase has more to do with drought in the Pacific Northwest, which has severely reduced electricity supplies available across the West.
“I’m not aware of anybody adding a bankruptcy premium to their price,” said Ackerman. “Nobody has mentioned that formally or informally. If anything, I think that generators and marketers would take solace in the fact that bankruptcy brings order to an otherwise volatile situation.”
Davis, whose administration has refused to reveal details about state expenditures on electricity, gave those numbers to reporters after meeting separately with Senate Republicans and Assembly Democrats.
The governor met with lawmakers to try to win support for his plan to help Southern California Edison avoid bankruptcy through a $2.76 billion state purchase of the utility’s transmission grid.
“I made the point of telling people that the cost of electricity on the spot market is rising rather dramatically since PG&E; went bankrupt,” said Davis, “since some people find that bankruptcy is not such a bad deal.”
The state has committed $5.2 billion to buying electricity since mid-January, when it stepped in to purchase power on behalf of Pacific Gas & Electric and Edison. The utilities had been driven to such deep financial trouble by soaring electricity prices that power generators refused to sell to them for fear of not getting paid. The state stepped in as a credit-worthy buyer to prevent more rotating blackouts.
The governor’s draft agreement with Edison requires approval of both the Legislature and the California Public Utilities Commission.
Republicans and members of Davis’ own Democratic Party have expressed skepticism about the deal, though lawmakers vowed to keep an open mind.
Davis said he would prefer that the complex agreement is not amended, but he is open to changes as long as the deal retains its “essential balance.”
