Legislators Unite Over Energy Price Issue

This may be the surest sign yet of the depth of California’s energy crisis: A bipartisan cross-section of the state’s congressional delegation, brought together Thursday by Gov. Gray Davis, not only agreed about the severity of the problem but also about the need for swift federal intervention.

“This meeting did not have the word ‘Democrat’ or ‘Republican’ used once,” Rep. Darrell E. Issa (R-Vista), said of the unusual spirit of cooperation at the meeting near Los Angeles International airport.

Members of both parties said the Federal Energy Regulatory Commission must slash wholesale electricity prices so California utilities can once again afford to buy power. Since January, the state government has been buying electricity on their behalf, as skyrocketing wholesale prices put Pacific Gas & Electric Co. and Southern California Edison billions of dollars into debt and many power suppliers refused to sell to them; PG&E; has since filed for Chapter 11 bankruptcy protection.

Although the Bush administration has said repeatedly that it is strongly opposed to price caps, and FERC has refused to grant them, California Republicans at the energy meeting said they are optimistic that the administration will agree to some other form of price regulation. They brushed aside the notion that such regulations might conflict with their ideological belief in a free market.

“This is not a free-enterprise situation,” Rep. Duncan Hunter (R-Alpine) said after the meeting. “In fact, it’s just the opposite.”

Specifically citing the huge disparity between natural gas prices charged to California and those charged in other Western states, he said California clearly has been the victim of unreasonably high energy costs. Under federal law, the FERC must regulate the prices of companies if it finds they are exerting “market power” to drive prices to unreasonable levels.

Executives from two Texas energy companies, meeting with legislators in Sacramento, denied Thursday that they had caused natural gas prices in California to artificially skyrocket by hoarding access to a critical pipeline into the state.

After the extraordinary meeting in Los Los Angeles, Rep. Brad Sherman (D-Sherman Oaks) said the biggest disagreement between California Democrats and Republicans appeared to be their relative faith--or lack thereof--in the ability of President Bush and his administration to help California. There has been much speculation that Bush, who lost California in November, has no political motive to help the state.

“We Democrats,” said Sherman, “hope very much that our skepticism is proven wrong.”

Davis--who sat flanked by Democratic U.S. Sen. Dianne Feinstein and the governor’s newly appointed chief energy advisor, S. David Freeman--said he used the meeting mainly to discuss the importance of conservation by Californians this summer and to ask the congressional delegation to pitch in. Five Republicans and more than a dozen Democrats attended the gathering.

Feinstein said Thursday that she has asked for a third time to meet with Bush to discuss the energy situation. Meeting with Times reporters and editors Wednesday, she described a recent meeting with Vice President Dick Cheney in which, she said, he “ignored” her appeal for federal assistance.

Feinstein has been among those critical of natural gas companies, saying they appear to have constricted access to a California-bound pipeline to run up prices.

The Brattle Group, a respected consulting firm, alleged Wednesday before an Assembly committee that Dynegy Inc. and El Paso Natural Gas Co. had manipulated the market by charging so much for the rights to their pipeline capacity that they had, in effect, withheld access to it.

That action, the experts said, directly forced companies trying to deliver gas to California to look for alternatives, clogging other pipelines and causing a surge in prices.

The explanation, El Paso executives said, was simple: Demand for gas soared in California because generators that use gas to make electricity increased production last year in response to the energy crisis.

“We’re not withholding capacity--no one is,” said El Paso Merchant Energy President Ralph Eads. “With these prices, you want to sell every molecule.”

In other developments Thursday:

* The agreement between Davis and Edison International to return its ailing utility arm to financial health is in “deep trouble and could be rejected by legislators,” the Standard & Poor’s credit rating agency said in a note to clients, citing legislative and other sources. A rejection of the deal “would be a humiliating setback for the governor,” S&P; said.

The agreement calls for, among other things, the sale of Edison’s transmission grid to the state for $2.76 billion and the sale of $2 billion in bonds--both designed to pay off the utility’s huge electricity debt. Edison agreed to several constraints, including the sale of electricity to the state at prices tied to the cost of producing power.

Since they returned Monday from a two-week recess, state legislators have been sharply critical of the Edison agreement and have indicated a desire to tinker with aspects of the deal. Some lawmakers have said publicly that a bankruptcy protection filing by Edison, like that of PG&E;, might not be such a dire outcome.

But a senior Edison executive said it is “way too early” to give up on passage of the proposal, which legislators have not yet seen in official form.

“There is an education process to do here,” the executive said of the highly detailed 38-page document. “The legislators should be asking questions. That is appropriate.”

* The Public Utilities Commission voted to investigate whether alternative energy providers violated contractual agreements by withholding supplies from PG&E; and Edison, which owe them hundreds of millions of dollars.

The action, Commissioner Carl W. Wood said, was prompted in part by lawsuits some providers have filed seeking release from their contracts with the cash-starved utilities. The producers of solar, wind and geothermal energy account for more than 25% of California’s electricity supply.

“The question is whether we will be able to rely on them in the long, hot days of summer,” Wood said.

Jack Raudy of the Renewable Energy Creditors Committee said the PUC needs to address the $700 million the producers are owed. “All we have gotten is rhetoric from the governor, the PUC and the utilities,” he said.

* An $850-million plan to entice Californians to conserve precious megawatts appears to be running into roadblocks, compounding predictions by state officials of tighter than expected energy supplies in May and June.

Davis signed the conservation spending package last week, earmarking $242 million of the new funds for the Public Utilities Commission to distribute to the state’s investor-owned utilities to support existing conservation programs.

But Barbara Hale, director of the PUC’s Division of Strategic Planning, said Thursday that since Pacific Gas & Electric Co. filed for bankruptcy protection April 6, the utility has stopped releasing conservation funds.

Hale, testifying before a state Senate committee, said PG&E;’s decision--coupled with the threat that Southern California Edison could follow a similar route to U.S. Bankruptcy Court--has complicated her agency’s efforts.

PG&E; spokeswoman Staci Homrig said her company plans to petition the Bankruptcy Court to have the conservation funds designated as a trust and separated from assets tied up in the bankruptcy proceedings. She said if the court denies the request, PG&E; would ask to be permitted to pay the expenses anyway. The process, she added, could take about a month--too long in the view of some legislators, given increasingly gloomy energy forecasts for late spring and early summer.

Deputy Director Bob Therkelsen of the California Energy Commission said his agency had been counting on a number of small power producers to bolster their output during that period. But he said some producers did not purchase the necessary equipment because PG&E; and Edison have failed to pay them in full for earlier electricity deliveries.

“It’s not a huge amount,” he said of the anticipated production shortfall, “but every little bit helps.”

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Landsberg reported from Los Angeles, Bustillo from Sacramento. Times staff writers Nancy Rivera Brooks in Los Angeles, Carl Ingram and Julie Tamaki in Sacramento and Tim Reiterman in San Francisco contributed to this story.