Something Solid for Taxpayers

Keeping electrical power flowing is rightly the first order of business for Gov. Gray Davis and state lawmakers. That effort includes the present scramble to reach long-term power contracts with suppliers and assuring suppliers that they will be paid for new sales. However, paying off the utilities’ past deregulation debts of $6 billion to $12 billion should be more carefully considered.

A bill to pay the utilities’ creditors with taxpayer or ratepayer funds is being rushed through the Legislature; Davis says it needs to become law by next week because an impending federal court decision could allow Southern California Edison and Pacific Gas & Electric Co. to raise customer rates immediately to recoup losses. Even if the utilities win the case, however, the state has considerable leverage because it is financing purchases of power for the utilities.

The reasonable intent of the pending legislation is to restore the utilities’ credit over time without their going bankrupt. But the state also has a responsibility to electric power customers and taxpayers.

The plan must require the utilities’ parent firms, who have surrounded themselves with barriers to economic liability, to share responsibility in this fiasco. Auditors have found that the holding companies milked the utilities of billions in cash that might have been used to avoid much of the debt.

One proposal that deserves a long look, by Senate President Pro Tem John Burton (D-San Francisco), would allow the state to buy the state’s 26,000-mile electric power transmission grid, owned primarily by Edison, PG&E; and San Diego Gas and Electric. The purchase price would cover much of the utilities’ debt.

With control of the transmission system, the state could make badly needed improvements to remove bottlenecks that exacerbate power shortages. The takeover would also partially restore state control over the power market by granting the state some regulatory authority that was lost with deregulation. The governor has touted giving the state some utility stock options as part of a deal. That certainly merits consideration, but it is not clear just how the arrangement would work.

As state Treasurer Phil Angelides said, the state should engage in a buyout, not a bailout, of utilities. Ratepayers are going to foot much of the bill and deserve something of value in return. At a minimum, that should be a reliable electric power system.