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Enron Mail |
Calif Assembly GOP Releases 'Plan R' To
Rescue Elec Utils Updated: Wednesday, May 23, 2001 04:14 PM ET LOS ANGELES (Dow Jones)--California's Assembly Republicans on Wednesday released "Plan R", an alternative to Democratic proposals on how to restore the state's financially struggling utilities to solvency. The plan put forth by the Republicans, who are in the minority in the Assembly, would have Edison International (EIX, news, msgs) unit Southern California Edison and PG&E Corp. (PCG, news, msgs) unit Pacific Gas and Electric Co. pay down debts by way of a dedicated-rate component taken from existing utility rates, including a rate hike effective March 27. Plan R would also increase the utilities' future return on investment, and allow for cost recovery in the future, a press release said. The utilities have incurred more than $14 billion in undercollections because under a rate freeze they couldn't pass high wholesale power costs to customers. Utility rates are frozen through March 2002, unless state regulators decide to lift the freeze sooner. To help lower rates, utilities would be required under Plan R to produce more short-term and long-term power as well as sign long-term contracts to hedge against real-time price spikes. Lower rates would also come from negotiating reduced prices for power bought from qualifying facilities and from negotiating with larger generators to accept only 70% of the money they are owed for past power deliveries. "The critical element (of a 30% concession) must come from the governor's leadership," said Assembly Republican leader Dave Cox. "Republicans aren't going to support any plan without a comparable negotiated concession from generators by the governor." The governor met with generators two weeks ago and asked them to accept 70 cents on the dollar from utilities. Most haven't said definitively whether they are willing to accept those terms, although Reliant (REI, news, msgs) has flatly refused to accept less than 100%. Plan R is a response to Gov. Gray Davis' plan to buy SoCal Ed's transmission lines for $2.76 billion and to help the utility issue $3 billion in bonds backed by ratepayer revenue. "The Republican plan is a shared solution that delivers more power to the grid. The governor's plan socks ratepayers with a staggering bill for transmission line junk," said GOP Assemblyman Keith Richman. Davis' agreement with SoCal Ed, announced more than five weeks ago, has gotten a cold reception from Democrats as well, who have proposed several "Plan B" alternatives, two of which are being taken more seriously than others. One would have the state hold a five-year option to buy SoCal Ed's transmission lines for their $1.2 billion book value, and would allow the utility to sell bonds backed by ratepayers for an amount determined by state regulators. That plan would also require the utility's creditors to accept 75 cents on the dollar for money owed. The other Plan B would allow Pacific Gas and Electric to issue bonds secured by their assets and use the revenue to pay creditors. In turn, the utility would pay an assessment, essentially a tax that would be used to service its debt. The Republicans' Plan R applies to both utilities, a spokeswoman for the Assembly Republican Caucus said. It is meant, in part, to move things forward, because the Democratic proposals have encountered slow going as of late, both Democrats and Republican lawmakers say. "Plan B has become Plan Backtrack," Cox said. "It is time to consider other options." But the Republican plan doesn't really offer much that is new, noted one consumer advocate. Democrats are already pushing for generators to accept less than what they are owed, as well as for long-term contracts and qualifying-facility price reductions, said Michael Shames of the Utility Consumers' Action Network. "The irony of the Republican proposal is that it is remarkably similar to the one being developed by the Democrats. It would appear as though the Republicans are trying to use a trick that Bill Clinton mastered - taking the opposition's idea and calling it his own," Shames said. The plan also doesn't explain how or why utilities would want to get back into regulated generation, vis-a-vis requiring them to produce more supply, Shames said. As well, funding the plan within current rates isn't possible, he said. "The bottom line is, the Republicans aren't pushing anything new or exciting. And in one case (funding within give rates), not even feasible. But I'm glad they are trying. I just wish they'd try harder to do something in a bipartisan way rather than play political games with the truth," Shames said. -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; jessica.berthold@dowjones.com Richard Costigan, III Chief of Staff Office of the Assembly Republican Leader California State Assembly Phone:(916) 319-2005
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