Western states agree to set regional emissions cap

Times Staff Writers

In a plan to curb global warming, five governors from Western states agreed Monday to work together to set a regional cap this year on carbon dioxide emissions, and join forces in a market-based emissions trading program within 18 months.

The agreement came as the largest utility in Texas, TXU Corp., announced that its board had approved a buyout offer of $45 billion, including debt, from private investment firms that called for a national emissions cap and market program similar to those in the Western states.

The governors of Arizona, California, New Mexico, Oregon and Washington signed the agreement at a meeting of the National Governors’ Assn. in Washington.


Gov. Arnold Schwarzenegger called the agreement “a very important step.... This is a partnership, just like we have with the Northeastern states, just like we have with England.”

New Mexico Gov. Bill Richardson, a Democratic presidential candidate who also signed the agreement, said states were “not waiting for the Congress or the Bush administration or the federal government.”

California Senate President Pro Tem Don Perata (D-Oakland), who has criticized Schwarzenegger for rushing ahead on market-based programs outside the state before imposing mandatory regulations here, offered qualified support.

“I applaud the governor for his efforts to help California and other states combat global warming,” he said in a statement. “But we must also take immediate steps in our own backyard to clean up our air, reduce greenhouse gas emissions from vehicles, and push renewable energy and alternative fuels.”

Not all environmentalists like market-based approaches, but Environment California, the National Wildlife Federation and others praised the multi-state agreement, initiated by Oregon Gov. Ted Kulongoski.

The investors buying TXU Corp. say they can finance the biggest private takeover ever, cut electricity rates, cancel new power plants -- and still make money.

Kohlberg Kravis Roberts & Co. and Texas Pacific Group believe they can do this because TXU is the largest electricity producer in a big state that is expected to keep growing at a fast clip.

They also believe that as private-equity firms, they can be patient.

They can spend money upfront and wait for a return on their investment without answering to public shareholders that demand quarter after quarter of rising profit.

TXU announced Monday that its directors agreed to a $32-billion sale to a group led by KKR and Texas Pacific and also including Goldman Sachs, Lehman Bros., Citigroup and Morgan Stanley.

The firms will pay $69.25 a share, a 15% premium over TXU’s closing share price Friday, and they will assume more than $12 billion in debt.

The Associated Press was used in compiling this report.