Profile: Governor Gray Davis' plan to alleviate California's energy crisis

03/04/2001
NPR: Weekend Edition - Sunday
Copyright 2001 National Public Radio, Inc. All Rights Reserved.

LIANE HANSEN, host: California's power crisis continues even though Governor Gray Davis has come up with a rescue plan. If Davis has his way, the Golden State will soon be the proud owner of more than 32,000 miles of high-voltage power transmission lines, countless conductors, insulators and a string of substations. But after weeks of intense negotiations, only one of the state's private utilities has agreed to a deal tentatively. The others still hold out. And as Rachael Myrow reports from member station KPCC in Los Angeles, the governor is running into some highly charged opposition from federal regulators.

RACHAEL MYROW reporting:

We've all seen the pylons. They stand like massive sentinels alongside freeways, great big salad tongs of gray metal holding up huge power cords that snap and crackle when it's wet. Across the West, the transmission grid connects cities to power plants, some of which are hundreds of miles away in Canada or Baja California. Now electricity surges forward at nearly the speed of light on these lines before arriving at various substations, like the Mesa Substation in East LA. Here we find Ronald Menilay(ph), a senior executive with Southern California Edison, standing before a set of humming transformers, which look like cousins of the robot from "Lost in Space."

Mr. RONALD MENILAY (Southern California Edison): These are the devices which we use to take voltage from the high voltage transmission lines that are coming into this station at 230,000 volts.

MYROW: Once these transformers step down or reduce the voltage, the electricity travels down smaller lines to distribution stations where the power is stepped down again before it heads out to neighborhood power poles. Menilay likes to think of the grid as a freeway system with on-ramps and off-ramps. It's the freeway portion of the grid that Governor Gray Davis wants California to buy, the instate, high-voltage power lines and the substations that run them. Davis argues that by buying the grid, California's cash can help Pacific Gas and Electric and Southern California Edison step back from the brink of bankruptcy. And because the state gets something in return, a physical asset, California isn't technically bailing the utilities out.

Governor GRAY DAVIS (Democrat, California): You want these utilities back in the business they know best. They know how to keep the lights on. They know how to run the grid. And even though we're going to accept the transmission lines, we're going to ask them to manage it for us on a leased arrangement. They have expertise that's accumulated over the decades, which the state doesn't have.

MYROW: The math works out for Michael Shames, executive director of the Utility Consumers' Action Network in San Diego. Shames estimates California could earn $1.4 billion a year pulling in fees generators typically pay the grid's owner. Half of that would go to maintain the grid; the other half to pay for upgrades the grid needs to bring more electricity to and from California.

Mr. MICHAEL SHAMES (Utility Consumers' Action Network): The opponents of this proposal have yet to put a plan on the table that so elegantly solves the financial crisis being dealt with by the utilities as well as the control crisis that California is facing right now with the federal government essentially controlling a lot of the policies that the state feels it should be controlling.

MYROW: But how much is that control worth? Even consumer advocates who generally support the Davis plan blanch at reports the governor is willing to spend anywhere from 6 billion to $9 billion, two to three times the book value of the grid. And everybody agrees the grid is overdue for about $1 billion worth of repairs. Again, Ronald Menilay.

Mr. MENILAY: Much of the transmission system in Southern California was installed just after World War II. So that means much of our transmission system is 50-plus years old and is coming to the end of its physical life.

MYROW: Deregulation crusaders argue Davis is heading in the wrong direction, that California's troubles won't be over until more power comes online and consumers start paying market prices for electricity one way or another. After all, the state would have to issue billions of dollars' worth of bonds to buy the grid. Robert Michaels is an economic professor at Cal State Fullerton.

Professor ROBERT MICHAELS (Cal State Fullerton): I don't see what it does to get Californians more power. It just sounds like a disguised tax, most of which is ultimately going to be paid in people's light bills.

MYROW: And then there's the issue of federal approval and who ultimately controls the grid. While the Federal Energy Regulatory Commission doesn't have jurisdiction over California, it does over the utilities and could veto the deal. The commission wouldn't comment for this report, but it's widely known to be skeptical of plans that pull California away from deregulation and towards state control. Jan Smutney-Jones, executive director of California Independent Energy Producers, shares those concerns.

Mr. JAN SMUTNEY-JONES (California Independent Energy Producers): It is somewhat ironic that the sixth-largest economy on the planet is in the process of nationalizing, you know, a basic piece of infrastructure like the transmission system.

MYROW: Even Governor Davis admits his plan won't be easy or quick to accomplish. In the meantime, the calendar marches inexorably on towards summer, when all parties agree California's in for a real power crisis, likely to dwarf the one we experienced last winter. For NPR News, I'm Rachael Myrow in Los Angeles.