California State, Feds Address Power Crisis

SAN DIEGO-Gov. Gray Davis announced an agreement to erase a $750 million debt run up by San Diego’s public utility—a debt that would have averaged $12,000 for commercial customers.

The deal with Sempra Energy, parent company of San Diego Gas & Electric, could erase a balloon payment that would have averaged $400 for residential consumers, $1,400 for small businesses and $12,000 for commercial customers, according to the governor.

SDG&E customers saw their power bills double and triple, as the utility became the first in the state to lift a cap on retail electricity rates. The utility began passing higher wholesale rates onto their customers.

The agreement announced today would modify a previous deal struck by Davis in September, which capped rates but allowed debt deferral, with utility customers paying it off over a period of years.

The new plan would dispose of the debt, if the state Public Utilities Commission takes certain actions. The deal would also allow the state to buy the SDG&E’s 1,800 miles of transmission lines for about $1 billion, provided the state Legislature approves.

That might not be a given. Several legislators have opposed Davis’ proposed purchase of Southern California power transmission system in a $2.76 billion deal. Foes have called the Edison agreement a “sweetheart deal” that pays the utility some 2.3 times the book value of its utility lines.

Meanwhile, in Washington, D.C., federal regulators unanimously ordered price ceilings on electricity sales across the West.

The Federal Energy Regulatory Commission ordered that limited price caps imposed on California during power emergencies be extended to all power sales seven days a week. It also extended the caps to 10 other Western states.

The price mitigation plan, which is expected to take effect Wednesday, comes amid growing pressure for the five-member commission to aggressively address allegations of price gouging in the Western power markets. Electricity prices have spiked up to 10 times what they were in 1999.