Bill Could Foil Davis’ Electricity Offensive

A Texas congressman plans to introduce legislation next week that would allow California’s small power producers to sell their supplies on the wholesale market--a move that could threaten Gov. Gray Davis’ plan to end the state’s energy crisis.

The proposal by Republican Rep. Joe Barton, the influential chairman of the House energy and air quality subcommittee, would permit producers of alternative and renewable energy to suspend their contracts with the state’s two biggest investor-owned utilities and sell their supplies to a third party.

Proponents say the bill could dramatically bolster the state’s electricity supplies by luring producers whose plants have been shut down by payment disputes to restart them in time for summer, when supplies are expected to be tight and blackouts are feared.

But allowing producers to sell to a third party would essentially devastate Davis’ plan to rescue the utilities and get the state out of the business of making emergency electricity purchases.

The governor’s plan is based on California locking down the costs of electricity from the utilities and small power producers for several years, at a reduced cost.

During that time, the state would buy the remaining portion of the electricity the utilities need to serve their customers. Meanwhile, the utilities would regain their financial footing by selling assets to the state in exchange for being allowed to recover a portion of their back debt through a surcharge on electricity bills.

If the alternative producers were allowed to sell their power on the wholesale market, the state could be forced to purchase much more electricity on the expensive open market.

That would dramatically increase California’s already massive power costs, forcing the state to further raise electricity rates and borrow even more than the record $12 billion in bonds it is planning to finance the plan. The state has spent more than $5 billion buying electricity that the utilities cannot afford, and Davis expects to spend $15 billion by year’s end.

“It is a way of busting the budget for the state of California,” said Joseph Fichera, a Wall Street energy consultant hired by the Davis administration. He called the potential release of the small producers a “disaster scenario” for the state.

Added Stephen E. Frank, chairman, president and chief executive of Southern California Edison: “Releasing them from their contractual obligations will simply exacerbate the problem, because they would then be selling into the market at additionally higher rates and just compound the state’s problems.”

But Eugene Peters of the Electric Power Supply Assn. disputed that contention. The state, he said, is already buying replacement supplies on the open market because of reduced output by small producers.

“If 3,000 megawatts are made available again, it will have a potentially profound effect on what people pay for power by bolstering overall electricity supplies,” Peters said.

Utility executives contend that only 1,200 megawatts are offline because of payment problems.

California is home to nearly 700 small energy producers, which generate more than a quarter of the electricity consumed in the state. They differ from their big out-of-state counterparts, which have been getting paid by the state.

The Barton proposal will be the subject of public hearings Tuesday and Thursday, and could move to the full House Energy and Commerce Committee for a vote the next week. Barton could not be reached for comment Friday.

The alternative-energy provision is one of several in his emergency energy bill. Others designed to help the West through a difficult summer of price spikes and energy shortages range from offering federal aid to relieving a bottleneck in the transmission system to permitting governors to secure waivers from environmental rules to boost power supplies.

The provisions dealing with waivers of environmental rules have been among the most controversial, drawing opposition from environmentalists.

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Times staff writer Richard Simon in Washington contributed to this story.