Excerpts from Gov. Gray Davis about california power crisis

Voice of Electricity Workers

April- June 2001
Excerpts from Gov. Gray Davis about california power crisis

And today, fiscal restraint is more important than ever. For as well know, a dysfunctional energy market, driven by out-of-state energy companies and brokers, is threatening to disrupt people’s lives and damage our economy.

You are aware of the basic facts. In a996 the Legislature and the Governor launched an untested restructuring of California’s electricity market.

Under their plan, our three investor-owned utilities-Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric – were forced to sell off their generation capacity to unregulated private companies.

And the price of electricity, long regulated by the California Public Utilities Commission, was to be set, instead, in a free-wheeling commodities market.

Now, our job today is not to engage in an ideological debate over the pros and cons of deregulation, and I’m not here to point fingers or assign blame. I assume the proponents or deregulation really did envision lower energy costs and smaller electricity bills. They certainly didn’t envision this mess.

But we must face reality. California’s deregulation scheme is a colossal and dangerous failure. It has not lowered consumer prices; it has not increased supply. In fact, it has resulted in skyrocketing prices, price gouging, and an unreliable supply of electricity. In short, an energy nightmare.

Well, my friends, it’s time for us to wake up.

The out-of-state generators who bought most of our utility’s power plants are now charging California several hundred percent more for wholesale electricity than we paid just one year ago.

Senator Dianne Feinstein and I have repeatedly urged the Federal Energy Regulatory Commission to use its exclusive powers to lower these record prices. But despite our repeated demands, the Federal Energy Regulatory Commission has shirked its responsibilities to protect ratepayers from this legalized high way robbery.

In fact, the Commission made matters worse when, in December, they lifted the hard price cap, causing the average price per megawatt hour to increase nearly 900 percent, compared to the same month a year ago. That is like paying 25 dollars for a three-dollar gallon of milk.

The out-of-state generators who bought most of our utility’s power plants are now charging California several hundred percent more for wholesale electricity than we paid just one year ago.

On many days, ten to twelve percent of electricity generated in California leaves our state in search of even more exorbitant prices elsewhere. On some occasions, the merchant generators have brought the State to the very brink of blackouts by refusing to sell us back our own power because they could find higher prices elsewhere.

Think about it: They’re refusing to sell us our own power.

Worst of all, there’s evidence that some generators may be withholding electricity from the California grid to create artificial scarcity, which, in turn, drives up the price astronomically.

My friends, electricity is not an exotic commodity like pork bellies, to be traded in the chaotic equivalent of a future market; electricity is a basic necessity of life. It is the very fuel that powers our high-tech economy.

And make no mistake, we will regain control over the power that’s generated in California and commit it to the public good.

Never again can we allow out-of-state profiteers to hold California hostage. Never again will we allow out-of – state generators to threaten to turn off our lights with the flip of their switch.

In the plan that I propose today, we will attack the problems of supply and price, both in the short-term and in the long-term.

As a down payment on this emergency effort, I’ve set aside one billion dollars in my budget to help stabilize the supply and price of electricity in the present and help provide new power generation to meet the demands of the future.

In the days that follow, I will ask you to pass legislation to take these immediate steps:

Ų One, restructure the governing boards of the system operators, so we can replace the current advocates for the energy companies with advocates for the public.

Ų Two, overhaul the crazy bidding process for electricity, which currently guarantees that every generator is paid according to the highest bid rather than according to their own bid.

Ų Three, streamline the process for utilities to enter into low-cost, long-term contracts for electricity; and then apply pressure to out-of-state generators to supply that power.

Ų Four, provide state regulatory agencies with the authority to order any functioning generating facility down for “unscheduled maintenance” to go back on line.

Ų Five, give the Public Utilities Commission 50 new inspectors to monitor and if, necessary, stand guard at any facility suspected of deliberately withholding power from the grid.

Ų Six, make it a criminal act to deliberately withhold power from the grid, if it results in the imminent threat to public health or safety.

Ų Seven, expand the authority available to the governor under a state of emergency in the event of imminent power outages.

Ų Eight, provide four million dollars to the Attorney General to investigate and prosecute possible racketeering, market manipulation, price fixing and other potential violations by merchant generators.

These generators may be acting within the law; but if they’re illegally gaming or manipulating the market, the Attorney General will track them down.

All these steps we can and must take immediately.

But soon after, we must do the following:

Ų Repeal the law that allows the three major utilities to sell their remaining generating facilities. Instead, we must require them to hold onto those facilities and sell their power to California consumers.

Ų Next, we must also require our municipal utilities to sell their excess power to California consumers at reasonable rates. Currently, they’re free to sell their power to anyone in or out of the state. Next, I’m calling on California to flex the enormous clout we have as consumers. We are 34 million strong and the sixth largest economy on the Earth. By reducing our electricity demand by even a small amount, we can reduce the price, avoid shortages, and lower energy bills.

So tonight, I am asking every Californian to cut consumption by as much as seven percent, and we will back that up with a 250-million –dollar investment. We’ll supply cash incentives for replacing inefficient refrigerators, washers and air conditioners with more efficient models; and we’ll create energy-smart homes, schools, workplace and communities.

Everyday, every Californian can contribute to the solution by turning off lights and appliances when not in use. For example, putting a computer on “sleep” mode reduces the power it would otherwise need by 40 percent.

The state will lead bu example. Every single day state government will cut its consumption by at least eight percent,

Now, to California consumers and businesses let me be clear. Our goal is to provide reliable, reasonably priced electricity to power the homes and businesses of this grate State.

To the utilities and financial community, let me say this : I reject the irresponsible nation that we can afford to allow our major utilities to go bankrupt. Our fate is tied to their fate. Bankruptcy would mean that millions of Californians would be subject to electricity blackouts, public safety would be jeopardized, business would close, jobs would be lost, investment would flee the state, and our economy would suffer a devastating blow.

To my colleagues in the Legislature, I say this: We have met many challenges before. Together, we will meet this challenge and we will meet it quickly.

I will work with the legislature, consumers, and the business community to address the financial condition of our utilities in the long-term.

My friends, there is no easy solution. But if we have to use the power of eminent domain to prevent generators from driving consumers into the dark and our utilities into bankruptcy, then that’s exactly what I will do.

All of these measurers I’ve just mentioned, I believe will proved relief in the short-term. But to build a reliable long-term supply of electricity, we must plan and invest now for the future.

For the 12 years before I took office, this State failed to build a single major power plant. Not one. Those days are gone.

Since April 1999, my Administration has licensed nine new power plants; five are under construction, as we speak.

But many more must be built to serve our growing population.

We must also provide low-interest financing for new peaking facilities and repowering of existing ones to make them cleaner and up to 40 percent more efficient. In return, these facilities must commit their power to California at reasonable rates.

Next, we must expand, the generating capacity under the control of the Department of Water Resources, and we’ll require the 141 campuses of the University of California, the State University System and the community colleges, to each move towards energy independence through cogeneration or other means.

And we will develop means of committing State-owned lands for the siting of generating plants on the condition that the energy be distributed right here in California.

These are all important steps.

But there is no point in building more plants in our state if the electricity is going to flow out of our state.

The time has come to take control of our energy destiny, and that will require either a Joint Powers Authority among the State and our 30 municipal utilities to develop the additional power we need, or a California Public Power Authority that can buy and build new power plants.

I will work with the Legislature to determine which option will work best for California consumers and businesses. I’m not interested in any Utopian ideas; I want ideas that will work in the real world.

The remedies I’m proposing tonight are reasonable and necessary under the present extraordinary circumstances. But as I’ve said before, everyone should understand that there are other, more drastic measures that I am prepared to take, if I have to.

Now, as important as the energy situation is, we cannot and will not allow it to overwhelm the many other important challenges and opportunities we face as a state.


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