One Fair Deal, More to Go

There is some good energy news in Gov. Gray Davis’ announcement that the state has agreed to buy about 8,900 megawatts of electric power over the next 10 years. That will provide one-fifth of the power the state needs each day, so this action should bring some badly needed stability to California’s wild energy market.

But Davis and the Legislature need to quickly take more action or risk losing a critical source of energy that has been serving the state for years--the output of small and medium-size generators, including an extensive network of power plants that rely on renewable sources of fuel, such as solar and biomass. And the Senate should quickly reverse itself and approve $1 billion to increase energy conservation. Even with Davis’ power deals, some of which are not final yet, the state remains significantly short of having enough electricity to weather a hot summer.

The Legislature’s first priority should be keeping nearly 700 alternative energy producers known as “qualifying facilities,” or QFs, on line. They have been selling their product to Southern California Edison and Pacific Gas & Electric Co. for nearly twice the rate the state would pay under the contracts Davis announced Monday--rates that were set by law during better times to make low-polluting and renewable power sources economically feasible. However, Edison and PG&E;, on the verge of bankruptcy for several months, have been paying the so-called QFs only pennies on the dollar, or not at all.

Some of the firms have considered forcing bankruptcy proceedings against the utilities so they can get paid, at least in part. Others have petitioned the Federal Energy Regulatory Commission to get out of their contracts so they can sell their power elsewhere. Many have just stopped making power.

The solution is in SB47x by Sen. Jim Battin (R-La Quinta) and Assemblyman Fred Keeley (D-Boulder Creek). It would unlock QF providers from their long-term contracts and allow the firms to be paid at a lower rate--something they have agreed to--for the next five years. Back payments, some due since November, would be made from Davis’ proposed utility relief plan.

The Legislature generally has dealt with the energy crisis on a bipartisan basis, as it should. But Senate Republicans blocked passage Monday of a critical measure, SB5x by Sen. Byron Sher (D-Stanford), that would appropriate up to $1 billion for a variety of existing and new energy conservation measures. The foes argued the money would be better spent on new generating facilities or a complicated rebate plan designed to reward customers for conserving power. But the state is relying heavily on conservation to get through the summer. The Sher measure would provide more effective and immediate results. The Senate should pass this bill when it comes up again in the next few days for reconsideration. Over time, it easily would save a billion dollars worth of power, but more important, it could help the state avoid extended blackouts this summer.

As for Davis’ power contracts, they drew criticism from some consumer groups because they lock in power rates over the next decade, when the cost of electricity may drop as new plants come on line and natural gas prices drop. That is a risk the state must take in order to gain price stability and adequate supplies in the short run. No one knows what the cost of power will be 10 years from now. The state cannot bet the health of its economy or the well-being of its citizens on lower rates that can be viewed only in a crystal ball. There are many critical details of Davis’ deals to be learned, but the contracts seem to strike a fair balance.