Governor Asks Generators to Take Less Than They’re Owed

SACRAMENTO — After spending months bashing independent power generators, Gov. Gray Davis on Wednesday called on them to take 30% less than the $1.2 billion they are owed by Southern California Edison.

“The Legislature [is] going to insist on a reduction,” Davis said after a meeting in his office with representatives of a dozen power generating companies. Davis said he told them that “70% this year was more valuable to them than whatever they get two or three years down the line” if Edison is forced into bankruptcy.

Davis urged generators to help California extricate itself from a summer of rolling blackouts by selling every available electron to the state.

He held out the possibility that he might sign legislation imposing a windfall profits tax on generators if they fail to help out this summer.

“My attitude on that would depend a lot on whether they showed good faith and cooperated throughout this process,” Davis said, emerging after a four-hour, closed-door meeting with the generators.

The Democratic governor issued an invitation last week to the chief executive officers of power generating and marketing companies including Enron, Reliant, Duke Energy and others to meet with him in Sacramento. But most of the executives who attended were a few pay grades below CEO.

Davis said he urged that the executives press lawmakers to approve the deal he struck with Edison in which the state would give the ailing utility an infusion of cash by buying its transmission system for $2.76 billion. Edison would use the money to restructure its debt and pay its creditors.

Davis said lawmakers will not approve the deal unless the independent power generators take less than they are owed.

He noted that the state and the power generators have “a collective interest in seeing that this summer has as few disruptions as possible.” If California is hit with repeated blackouts, Davis has said, other states will delay or end efforts to deregulate their electricity markets.

Executives, who braved taunts from a few protesters wearing pig masks and carrying a small but loudly squealing pig, characterized the meeting as businesslike. But at least some generators are less than enthusiastic about taking less than they are owed.

“I have a real concern about the notion that we should give back some of the money we made,” said John Stout, a senior vice president of the Houston-based Reliant Energy, which says it is owed $300 million by Southern California Edison and Pacific Gas & Electric.

Stout said that much of the money Reliant made in California is being reinvested in power plant construction--although he added that the company has no generators under construction in California.

“Political uncertainty has put a huge risk factor on investment in California,” Stout said.

Randy Harrison, an executive with Mirant, based in Atlanta, said the issue of a so-called “haircut” was discussed, though not in detail. Harrison said it is “not completely off the table.” But he added that his company is not profiteering. Nor has it withheld electricity in any attempt to manipulate wholesale energy prices.

“Our people are working 24 hours a day and we are spending millions of dollars to try and keep our power plants up and running,” Harrison said.

The meeting was aimed at opening communication with the generators. But Davis aides said the governor also wanted to bring attention to companies that he believes are at least partly responsible for California’s energy crisis.

The meeting occurred as polls show that voters are increasingly angry about the energy crisis and as lawmakers, fearful that the energy crisis will wreck California’s economy, sharpen their attacks on power generators.

Legislators have introduced bills to impose a windfall profits tax on generators and make it a felony to manipulate electricity markets. Lt. Gov. Cruz Bustamante and Assemblywoman Barbara Matthews (D-Tracy) sued several generators last week. Atty. Gen. Bill Lockyer is investigating whether generators violated antitrust and other laws as wholesale prices soared to record heights, hobbling Edison and helping push PG&E; into bankruptcy.

Voters are not sure who is to blame, but they are convinced that “whoever is taking our money is taking way too much,” said Democratic political consultant Richie Ross.

“They want to find this deregulation’s Charles Keating,” Ross said, referring to a central figure in the 1980s savings and loan debacle.

Still, as much as Davis and others demonize generators, the state needs them, some officials say.

“We don’t have enough power without them,” said Assembly Energy Committee Chairman Roderick Wright (D-Los Angeles). “There needs to be an adult discussion to see what can be worked out.”