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Enron Mail |
F.Y.I.
California Lawmakers Vote to Limit Power Costs By Rebecca Smith 09/01/2000 The Wall Street Journal Page A4 (Copyright © 2000, Dow Jones & Company, Inc.) California lawmakers voted to extend modest relief to San Diego residents burdened with high electricity bills and set the groundwork for faster construction of badly needed power plants. They stopped short, however, of passing legislation that would roll back retail power rates to levels seen prior to deregulation . Late Wednesday, lawmakers sent a bill to Gov. Gray Davis that limits to 6.5 cents per kilowatt hour the amount that small customers of San Diego Gas & Electric Co. can be charged. The utility is allowed to add power-delivery and other reasonable costs to that commodity price. The price, equivalent to a bulk power cost of $65 per megawatt hour, is far higher than the average price of power for 27 of the 31 months in which California's market has been deregulated. But in June and July, the average price of power obtained by the utility from a state-sanctioned energy auction rose to 12 cents and 10.5 cents, respectively, compared with the 2.3 cents and 2.8 cents charged in those months a year earlier. Passed directly through to customers,the resulting bills sparked a near mutiny. The rate-cap measure applies to residential and small commercial customers, as well as to schools and hospitals. In addition to the rate cap, which can be adjusted upward or downward by the California Public Utilities Commission until December 2002, the legislature earmarked $150 million of general-fund revenue, which can be used to subsidize San Diego power costs if they greatly exceed the 6.5-cents-per-kilowatt-hour rate. For now, the utility would be expected to make up any difference between revenue collected and the actual cost. Steve Baum, chairman of Sempra Energy, parent of San Diego Gas & Electric Co., said the rate-cap measure is "deeply flawed" because it limits the amount prices can rise but sets no floor. That means any shortfall could grow -- without a mechanism for customers to pay it down -- until the end of the rate-cap period, which could last until December 2002 or December 2003. Mr. Baum said Sempra stands to suffer an undercollection of perhaps $664 million, provided future prices approximate the New York Mercantile Exchange forward prices through December 2002. "It's irreparably damaging to Sempra," he said because it "creates tremendous uncertainty" that makes it hard for the San Diego energy company to finance new projects such as a new transmission line. The legislature also appeared likely to approve a bill speeding up the permit process for the construction of new power plants, in part by beefing up staffs of regulatory agencies that review the plans. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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