- The Washington Times - Thursday, January 11, 2001

Representatives of the Clinton administration, California Gov. Gray Davis' office and California's biggest power companies continued to work yesterday to solve the state's electricity crisis.
The officials tried to build on the progress senior White House representatives, Mr. Davis and electric-industry executives made during a seven-hour meeting at the Treasury Department, which ended early yesterday.
Mr. Davis told reporters outside Treasury yesterday just after midnight that participants at the meeting agreed to work on ways to persuade wholesale-power suppliers to sell more electricity to utilities under long-term contracts.
"We worked for seven hours on this issue … we made progress. Particularly on the important issue of long-term contracting to bring down the rates and ensure reliable power at a very attractive rate," he said.
Hours after the meeting concluded, Federal Energy Regulatory Commission (FERC) Chairman James Hoecker resigned as head of the independent agency. Mr. Hoecker, a presidential appointee who participated in the marathon Treasury summit, has been the target of criticism by Mr. Davis for failing to cap wholesale electricity prices, which have risen to $320 per megawatt hour from $34 one year ago.
"Now is clearly the time for me to say, it's time for new leadership," Mr. Hoecker said at a regular FERC meeting yesterday.
Mr. Davis and Energy Secretary Bill Richardson gave few details of the talks, but they said meetings would continue in Washington this weekend.
Federal, state and industry officials resumed meetings late yesterday morning to discuss details of an agreement reached during the seven-hour negotiation to give cash-strapped utilities additional time to repay some debt, a Clinton administration source said.
Pacific Gas and Electric Co. has a bill of about $1.2 billion due March 2, the company said in a filing yesterday with the Securities and Exchange Commission. That is in addition to payments of $583 million due Feb. 1 and another $431 million due March 2, as the utility has reported previously.
An administration source said the parties at the negotiating table want to find a way to push back to April 6 the date by which some of the debt owed by utilities is repaid. Participants in follow-up talks were working on the terms of an agreement to delay repayment.
The forbearance that federal, state and industry officials at the Treasury summit agreed on raises other issues, including how to come up with an acceptable plan that does not look like a bailout of the utilities and what to do after April 6, assuming the debt has not been fully repaid.
Participants in yesterday's follow-up meeting also discussed whether California should establish a state agency to buy power at favorable long-term rates. If it does, the state would resell that electricity to utilities to shield them from increases in the short-term commodities market for power.
It's still not clear how long it will take for the participants to make the kind of progress needed to reduce wholesale electricity rates in California and ensure that utilities don't stop supplying electricity.
But Mr. Davis was optimistic that progress on a deal to persuade wholesalers to sell more energy on long-term contracts was a good start and could result in a solution.
"This problem will never go away unless we can diminish our reliance on the spot market. That is best done through long-term contracting… . We believe we can contract at very attractive prices, which will bring stability to the futures market, ensure reliable power at an affordable rate," the governor said yesterday morning.
Deregulation began in California in 1996, but the electricity system is actually half-regulated: Utilities are losing money trying to cover the deficit caused by unregulated wholesale power rates and consumer rates that are capped by the state.
The state's utilities can charge consumers an average of 6.5 cents per kilowatt hour of electricity, but unregulated wholesale suppliers charged utilities an average of 30 cents a kilowatt hour in December.
California consumers use an average of 500 kilowatt hours of power each month.
California's Public Utilities Commission last week agreed to a 7 percent to 15 percent rate increase in consumer prices, but the utilities which had asked for 30 percent increases said that is not enough to recoup mounting losses.
Pacific Gas and Electric, which provides electricity to 11 million homes and businesses, lost $6.6 billion from June through December.
Southern California Edison Co., which provides power to 4 million homes and businesses, has lost $4.8 billion since May.
The Treasury summit included six of California's elected officials, chief executives of the state's three largest electric utilities and nine of the major power producers and wholesalers.
In addition, Mr. Richardson, Mr. Hoecker, Treasury Secretary Lawrence H. Summers, National Economic Council Director Gene Sperling, and Martin Baily, chairman of the Council of Economic Council of Advisers, attended the meeting.
"All sides gave a bit," Mr. Richardson said.
But Mr. Davis took a hard line with wholesale suppliers, said an official who attended the meeting.
"He took a hard position with respect to prices. He took a tough position, and his tone was even tougher. I think it rubbed some people the wrong way," the source said.


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