California Captolweek February 9, 2001
#522
Power Plants - Utility Bailout
(( Jack ))
Lawmakers
try to lock in on bearable prices and guarantee a stable energy market.
Hello I’m
Melissa Crowley.
((Jack))
And I’m
Jack Kavanagh . . . the latest on California’s energy crisis is next.
((Jack))
Thank you
for joining us.
The Governor
and legislature may have kept the lights on by authorizing the state to buy
power long term, but they still face pressure to come up with another piece of
the energy puzzle.
(( Melissa ))
Jack, we’re
talking about finding some way to avoid bankruptcy for California’s largest
utilities.
Several
plans are on the table.
The
Governor wants a solution before a court decision Monday
that could
allow utilities to boost rates to help pay for debt, they say, reaches
12 billion
dollars.
Soundbites
((Fred Keeley, Assembly Speaker Pro
Tempore [D]))
I’m very,
very concerned that if we go forward with that suit and the utilities win,
which they’ve already won one round in federal court, that it could cause an
instantaneous eighty-six percent federal increase in rates for all consumers in
California.
((Assm. Keith Richman [R] Sun
Valley))
If we’re
going to get the utilities in better financial shape, then, yes, they would
need some bailout.
End
Soundbites
((Melissa))
We’ll have
more on bailout plans later in the program.
((Jack ))
But first,
a status report on the the energy
crisis.
The
Department of Water has signed the first long-term supply contracts.
The lengths
of those contracts are 3 to 10 years.
The
Governor’s office has not released specific costs, but says prices are below
market rates.
Also this
week, the Governor used his emergency powers to seize contracts from the
California Power Exchange.
The
exchange had threatened to sell those contracts if PG&E didn’t make overdue
payments.
((Melissa))
Legislative
oversight hearings are underway in the Capitol, which include an investigation
into the utilities financial status.
Finally, as
federal emergency orders in Washington expire,
U-S Senator
Dianne Feinstein introduced legislation to allow the U-S Secretary of Energy to
set rate caps.
Western
Governors can opt out if they can find lower rates.
Power
supply and generation are also in the spotlight.
The state
has not built a major power plant in the last 10 years.
((Jack))
Joining us
to discuss state plans and potential federal, state and local obstacles . . .
Hope
Schmeltzer, Director of the Governor’s Clean Energy Green Team, a group working
to speed approval of power plants.
And
Republican State Senator and energy committee member Jim Battin.
DISCUSSION PT. 1
((Jack))
Hope, let’s
begin with you. What is this Governor’s
Clean Energy Green Team?
((Hope Schmeltzer, Clean Energy Green
Team))
The
Governor’s Clean Energy Green Team is a task force of local, state, and
regional agencies working together to cut red tape to streamline the permitting
of power plants, and to insure that we bring power online in the state as
quickly as possible while observing environmental, health and safety, and
public participation rules.
((Jack))
So that means
you can get a power plant cited and up and running and plugged in and
generating juice in, what, two years? A
year and a half? Five years? What?
((Hope Schmeltzer, Clean Energy
Green Team))
Much less
time than that. Of course, the size of
the plant and the type of the plant will depend on the type of the process that
you go through. However, what we’ve
done is brought together all the different agencies involved and we have them
working together at the same time so that issues are resolved quickly and
things move forward quickly, both for traditional power plants and for
renewable energy resources.
((Jack))
Sounds like
a great idea. Jim, let’s put them in
your district.
((Senator Jim Battin, [R] La
Quinta))
Well,
actually we have a lot of renewable power in my district right now. I represent the 37th Senate
district, which is the Southeastern part of the state.
((Jack))%20La%20Quinta3.gif)
So you
don’t need a new power plant?
((Senator Jim Battin, [R] La
Quinta))
We have
windmills, and we have bio-mass and geo-thermals, and actually there are three
very serious power plants going in different phases of the system right
now. One towards the Martinez Tribe,
the reservation area. Another one in
North Palm Springs out at Blithe, the energy project. I would imagine that we’ll see in the next couple of years over
fifteen hundred megawatts of power just coming out of the area I represent, so
the people I represent aren’t the problem here. It’s a lot of the other parts of the state that have adopted what
I call this “banana theory.” You know—
((Jack))
Build
absolutely nothing, nowhere, at any time, right?
((Senator Jim Battin, [R] La
Quinta))
Build
absolutely nothing, near anyone, anywhere, and that seems to be an issue, and
so we have introduced legislation. We
did it yesterday. We had a bipartisan
news conference with Senator Byron Sher who is the lead author on this. I am the joint author. We are going to expand on a bill that we
carried last year, assembly bill 970, that I wrote with Assemblyman Denise
Ducheny then about citing power plants and making sure that there is an
incentive for local governments to—
((Jack))
All right,
let’s pick up on that in just a minute.
We want to take a closer look at the issue of power plant construction
itself.
END DISCUSSION PT. 1
((Melissa))
That’s a
good point, Jack, because we did mention more power plants are on the way. So far, nine have been approved. Two are now under construction. One of those is being built by CalPine. We visited the site in Northern California
that’s scheduled to open this summer.
PLANT
CONSTRUCTION PACKAGE
The
race is on at the Sutter energy center…
When finished, it will generate
enough energy to power half a million homes…
Originally set to open in August,
six hundred workers are working ten hour shifts day and night to come online in
July…
((Tom Miller, CalPine
Construction Manager))
We understand how critical it is to get this plant running
before July. I mean, we’ve experienced
rolling blackouts right here during construction.
Sutter
was the first plant to be licensed under deregulation…
It is one of nine plants that the
state approved, but the building process can take several years…
With only two new plants opening
this summer, including Sutter, we’re still well short of closing the
electricity gap…
That adds to the pressure here. Testing begins in April to prepare to
deliver power in July, and Smud already plans to purchase some of that energy
for customers…
Demand for energy has
skyrocketed. Efforts are under way to
find a way to speed the power permitting process, but some worry the
environment may lose out in the process…
((Jim Magavern, Sierra
Club))
And it’s very important that clean air and clean water not
be sacrificed to pay the price of the electricity debacle that has been caused
by greedy and corrupt companies and politicians.
CalPine says it has worked to address concerns. Berms have been added to protect
groundwater, and more than six hundred trees will be planted to shield the
plant from view…
But the plant’s use of natural gas
for cleaner generation could be a problem…
((Tom Miller, CalPine Construction
Manager))
It’s going to be imperative that we have the gas available
to fire this plant.
Supplies are tight because companies are hesitant to sell
natural gas to utilities because of their poor credit…
Still, CalPine is hopeful that
PG&E will deliver. A lot is at
stake for customers and the company…
San Jose-based CalPine footed the
three hundred-fifty million dollar construction bill of the 17 acre site, and
while they acknowledge that this plant alone will not meet the state’s needs.
Still, it’s a start, and it proves
community concerns can be balanced with the need for power…
((Tom Miller, CalPine
Construction Manager))
What you see here is something that everyone agrees we need
no matter what side of the issue they’re on, and that is that we need new power
plants, fuel efficient and clean.
END PLANT CONSTRUCTION PKG.
((Melissa))
In addition
to the 9 approved power plants, 12 are under consideration, including one in
Redding, Antioch, Morro Bay, Bakersfield, and San Diego.
If all are
built as planned, it could boost the state’s power generation capacity by 20
percent.
DISCUSSION PT. 2
((Melissa))
Hope, is
this enough?
((Hope Schmeltzer, Clean Energy
Green Team))
I actually
want to correct your numbers a little bit because we actually have three power
plants that are coming online by July.
We have more than that under construction. I believe three or four more than that that are currently under
construction that will be coming online; one by the fall, and several by the
following year.
((Melissa))
((Hope Schmeltzer, Clean Energy
Green Team))
Good news.
((Melissa))
Is that
still going to head off the summer power crunch?
((Hope Schmeltzer, Clean Energy
Green Team))
There are
many things that are happening that will head off the summer power crunch. The Governor announced his conservation plan
last week. This week he is announcing
his generation plan, which will focus on the short-term and the mid-term power
crunch by getting more power online, boosting the generation from existing
plants, bringing more power plants online, bring more renewable sources online.
((Jack))
So it
sounds like everything is in the pipeline, pardon the pun, to get this done
efficiently and as quickly as possible, which brings us back to “banana” again,
build absolutely nothing around or near my area.
((Jim Battin, Senator [R] La
Quinta))
Right.
((Jack))
Is there a
way for the legislature to say, for example, to a community in Los Angeles, “If
you agree to have a power plant in your area, we’d agree to give you a break on
the cost of power or some sort of incentive”?
((Jim Battin, Senator [R] La
Quinta))
There are
two things that the state can do. One
that is in the authority of the state currently, and the second one is
something that we’re doing in this bill that we introduced yesterday. First, the California Energy Commission does
have the authority today to override local jurisdiction. As a matter of fact, that is the controversy
that the Metcalf plan in San Jose is that the area presented an 11-0 vote
against the Calpine power plant facility.
The legislature is pretty much going to push that forward and encourage
the Governor to act through the Energy Commission, so we can do that. That’s the rough way to do it, but—
((Jack))
((Jim Battin, Senator [R] La
Quinta))
One of the
ways that we would like to do it is to allow for the property tax to be kept by
the local jurisdiction. That’s a lot of
money. Right now, they lose a
tremendous amount of that and they only get a little sliver left, but by
bringing in a power plant that generates hundreds of millions of dollars in
revenue, that’s a very significant amount of money there, and they can capture
that, and that would be a very good incentive for local governments to bring
them in.
((Melissa))
Now when we
talk about power plants and incentives and not in my backyard, other people
worry that it could be the environment that suffers in loosening the
restrictions. The Governor is actually
speaking at the Sierra Energy Center about getting more incentives and getting
more plants online. Are we putting
anything at risk? Are we
short-circuiting some of the environmental regulations, and are they to blame,
maybe, for why there was not a new plant built?
((Hope Schmeltzer, Clean Energy Green
Team))
Absolutely
not. The Governor’s commitment to the
environment is beyond question. We are
bringing on new power plants that are far more efficient and far cleaner than
the power plants we’ve had online in the state for years. We are cleaning up old power plants; that is
going to continue. We are building new
power plants that will replace older, dirtier plants and that will be much
cleaner, produce more power using less natural gas, and produce cheaper energy
for the state.
((Jack))
Jim, we’ve
been running some of these plants very hard, and some of them require
upgrading, do they not, for air pollution scrubbers. Can that be delayed a little bit just to keep those plants
online?
((Jim Battin, Senator [R] La
Quinta))
Well, the
air districts and the regulatory bodies have been doing that for the last
year. You get to a point of simply not
being able to do it anymore. What we
would like to do in the legislation is provide an incentive for them to
re-power or retrofit. You know, you
have these turbines, these natural gas-fired turbines, which is basically what
we’re talking about in California, and there are some older models of those
that aren’t as efficient, and they pollute more. We’re providing incentives for those generators to bring in and
put in brand new state of the art turbines, which will produce more power, and
they’ll be cleaner on the air. We’re
giving them lots of incentives, actually, to do that. We’re basically allowing them to do it with a negative
declaration on the environmental process because there’s already a plant there,
and it’s dirtier.
((Melissa))
All right,
as we talk about more power though, one of the natural questions that people
realize is even if the state is able to reach enough power and increase
capacity, what about the transmission lines?
Do we actually have the transmission highway to handle additional
power?
((Hope Schmeltzer, Clean Energy
Green Team))
We are
working to upgrade the transmission system across the state. It is something that is being talked about
in the legislature. The Governor is
going to have a plan on transmission and—
((Jack))
Isn’t that
the reason why we’ve seen rolling blackouts in Northern California and not
necessarily in Southern California?
Even though there may have been some extra power in Southern California
to prevent the Northern California blackout, but you can’t get it here over the
transmission lines.
((Hope Schmeltzer, Clean Energy
Green Team))
I don’t
think there’s any one reason, and I would love to speak more about the
transmission system, but it’s not really my area.
((Jim Battin, Senator [R] La
Quinta))
If you
look, PG&E was in the north, and Southern California Edision was in the
south, and, historically, never the twains shall meet in that, really, they
were self-contained generators, and that’s what happened, and we don’t have a
lot of transmission in “Path 15,” as it is called, between south and north.
((Melissa))
We need to
work on that. As we enter our final few
moments here together, your thoughts on why it took us ten years to realize
that we needed more power generation.
((Jim Battin, Senator [R] La
Quinta))
Well, it
didn’t take us ten years to realize it.
It’s taken us ten years to try to actualize it, to actually build more
power plants. You know, you’ve got a
lot of different dynamics in all this, and I’ve said time and time again, there
is no innocent party in all of this.
The utilities aren’t innocent; the PUC is not innocent; the legislature
is not innocent. Everybody had a role
in creating what I call “The Perfect Storm” in California.
((Jack))
Well, the
storm is basically in the past. What
we’re looking for is a way to get out as far as the future is concerned. Hope, is this plan that the Governor has now
the solution? Is this the fix, or is it
just part of the fix?
((Hope Schmeltzer, Clean Energy
Green Team))
The
Governor’s plans, the different
pieces working together will be the solution we believe to this power situation
in California.
((Jack))
All
right. Thank you both. Hope Schmeltzer and Jim Battin, thanks for
joining us.
END DISCUSSION PT. 2
((Jack))
In a
moment, what’s “at issue” this week?
Bailing-out utilities and how much will it put a squeeze on consumers?
((Melissa))
But first,
we would like your input on the energy crisis.
What
questions do you want answered?
Here’s how
to send us your questions and where to find more information on the energy
crisis.
www.capitolweek.org, the latest
information on local government and state politics, plus in-depth coverage of
California’s energy crisis, “@issue: Energy,” where you’re only one click away
from daily coverage, stakeholders, special reports, and all archived
Capitolweek coverage. Don’t forget to
send us your comments and questions each week, and let us know where you are
tuning in to California Capitolweek…
((Melissa))
Throughout
our energy crisis, there has no been no shortage of criticism on bailing out
utilities.
((Jack))
That’s the
subject of “at issue” this week . . .
our insiders look at what’s really being said behind the scenes.
@ ISSUE:
UTILITY BAILOUTS
((Jack))
The
governor and legislative leaders want PG&E and Southern California Edison
to give the state something in exchange for relieving their debt, a debt
utilities say has reached more than 12 billion dollars.
The
Governor prefers that the state receive stock options, but Senate president
John Burton thinks the state should take over the utilities' transmission
system.
Soundbite
((John Burton, Senate
President))
It’s
like owning the highway system, so that the power moves on the highways, and if
have the system, you have better control over it.
End
Soundbite
((Melissa))
Some
republicans say the state should not become more involved in the power
industry.
((Jack))
Joining
us now, 
Gale
Kaufman, Democrat political consultant…
And Dan
Schnur, Republican Political Consultant…
Dan,
“bailout” as we know it in the Capitol is a dangerous political word. The word “bailout” is poison politically, so
what happens? Does a deal go together
that disguises a potential bailout for a couple of years until the Governor
gets reelected and the legislators get reelected, and then the full impact of
it becomes apparent? Is that how it
works?
((Dan Schnur, Republican Political
Consultant))
Well, Jack,
your point is exactly right. Number
one, inside the Capitol they call it a “buyout” but for all of us human beings
and the rest of California, it is a bailout, and by setting aside ten billion
dollars, that’s just enough money to get us through about two years worth of
power buying, and, lo and behold, that gets us through the Governor’s reelection. So, what the people of California are
getting when this bond package passes is a delayed rate increase and a delayed
tax increase that says, “Please don’t open until Christmas 2002.”
((Melissa))
Gail, how
do you sell this to your voters if you’re a lawmaker, that the danger of having
the utilities go bankrupt over—
((Jack))
They call
Gail and ask for advice.
((Gale Kaufman, Democratic Political
Consultant))
[laughs]
They pay me a lot of money to answer that question.
((Melissa))
I thought
you were the correct person to address that question to, but how do you make
this go over with voters and make them understand the ramifications? You know, most people don’t have a lot of
sympathy for the utilities; they supported deregulation
((Gale Kaufman, Democratic Political
Consultant))
Well, I
don’t know how they’re going to explain it.
I think it’s quite difficult to explain, quite frankly, and whatever you
call it, there’s a lot of that going on in terms of coming up with just the
right phrase, talking to PR firms. At
this point, I think the biggest problem that every elected official has is
talking straight to people when they get their electric bill and they get their
gas bill, and they see it going up right now.
We don’t have to wait until the end of next year to see rates going
up. Anyone who has gotten a bill
recently—unless I’m the only one in the state whose bills are going up—they see
it now. So, I think the best thing you
can do is talk honestly and straightforwardly with people and say, “This is the
only way out.” Don’t scapegoat anybody,
and just try to explain what they’re doing, which they do believe is the best
solution.
((Jack))
You know,
Gale makes a great point with “ratepayer rage,” but in the legislature do they
see Gray Davis as the guy that gives them the political cover? That the members of the Senate and Assembly
are not going to get hit so hard if they can say, “Well, you know, Davis should
of solved this problem”?
((Dan Schnur, Republican Political
Consultant))
Well, not
even close. When push comes to shove,
they don’t trust Gray Davis in the legislature. Not the Republicans or the Democrats. If you remember last week before the bond package could move
through the legislature, they wouldn’t vote until they got in writing from the
Governor a commitment to support it. So
many legislators have sent bills to the Governor over the last two years with
assurances that those bills would be signed, only to have the rug pulled out
from under them with the vetoes.
They’re very, very leery of following his lead. They don’t think he’s going to provide them
with political cover, and to Gale’s point, they’ve watched him blame his
predecessor; they’ve watched him blame the utilities; they’ve watched him blame
the energy providers; they’ve watched him blame the federal government. Gray Davis is looking for people to blame
and most of the legislators are smart enough to know that they’re not exempt
from that.
((Melissa))
Are most
people understanding what will happen if things go belly up with the
utilities? There are some folks that
have suggested to just let them go bankrupt.
Do you think there might be any gutsy lawmakers who will say, “What’s
the harm in that?”
((Gale Kaufman, Democratic Political
Consultant))
I think
there are a lot of people who are talking about that because if you do look at
polls—which as I’ve said is a bad thing to do right now, although I like polls
at different times of the year. If you
look now, the one thing that is in every single survey is that people don’t
believe the utilities. They think that
they manufactured a lot of this problem, and they think that they should be
responsible for getting us out of it.
((Melissa))
And those
audits probably didn’t help.
((Gale Kaufman, Democratic Political
Consultant))
Exactly. Those audits and the fact that, at least in
PG&E’s case, some of the people have gotten stock options before the rate
increases went into effect, and so, you’ve got a situation where there’s not a
lot of trust all the way around, and I think you can make a case for forcing
the utilities to take on more of the burden.
((Jack))
So what
does that mean for me? I’m a ratepayer;
I’m also a voter. What does that mean
to me down the road?
((Dan Schnur, Republican Political
Consultant))
Well, I think
Gale began to talk about this a moment ago when she explained how the
politicians explain this to the voters.
Rule number one, no laying blame because voters like yourself aren’t
interested in whose fault it is; they want to know what your going to do to fix
the problem. Step two, be honest with
them. Say, “Because of what we’ve done,
your rates are going to go up, and here’s what we’re going to try to do to keep
that from being any more painful than it absolutely has to be.” Step three, and this is the most important
one, is this is what we’re going to do, not in the short-term but in the
long-term to make sure that this never happens again. Here’s how we’re going to make sure that you, the people of
California, have enough power so that we don’t go through several years from
now what we’re going through right now.
And that’s something that the Governor and the legislature are just
starting to talk about. It’s in the very
early stages.
((Gale Kaufman, Democratic Political
Consultant))
You know, when
the legislature voted for deregulation, they certainly didn’t think they were
voting for rate increases. In fact,
they thought they were precluding rate increases.
((Jack))
Well, they
put that in the bill.
((Gale Kaufman, Democratic Political
Consultant))
Exactly, so
a number of years go down the line, and, lo and behold, it wasn’t what they
thought it was they thought it was, and they have to say that, and they are
saying that. “We thought we were doing
a good thing here. It didn’t
work.” So what’s wrong with doing that
right now. This is so complicated. I’m trying to keep up with it. It’s a hard issue.
((Jack))
You know
what’s been the most frustrating—
((Gale Kaufman, Democratic Political
Consultant))
People
don’t need to get anything but the truth at this point.
((Jack))
((Dan Schnur, Republican Political
Consultant))
((Gale Kaufman, Democratic Political
Consultant))
It isn’t
quite that easy. I would answer your
question differently. I think that each
one of the people you just named has brought to the table some piece of this
equation and good solutions. I mean, I
think also that the Bush administration and the Republicans are saying now,
“All we have to do is relax environmental standards and everything will be
great.” Well, that’s a crazy thing to
say to voters at this point too, because I don’t think voters in California
want to see that happen. So, I think
what you’re seeing is lots of people all of the sudden becoming experts or
trying to become experts on a very complicated subject and do the best
thing. I really think everybody is
really trying to do the best thing they can to solve short-term and long-term.
((Dan Schnur, Republican Political
Consultant))
They are
trying to do the best thing, but they are starting to try to do the best thing
in earnest seven, eight, ten months after they should have. That’s the point I am trying to make, and to
translate Gale’s “Kaufmanese” to English, what the Republicans and the Bush
administration is saying is, short-term fixes aside, the real way to fix this
problem is to look at the long-term, not just by simply throwing the
environment to the side, but by finding ways to increase power capacity. That’s something Jim Battin talked about
earlier.
((Melissa))
On that
note, we are unfortunately out of time.
Gale and Dan, thank you very much for joining us.
We would
like your thoughts…
Should the
state bail-out utilities if it means a more stable energy market?
Again, send
your feedback and questions about the energy crisis to capitolweek dot o-r-g.
END @ ISSUE
((Jack))
Melissa,
time now to bring some viewers to the table.
Last week,
State Treasurer Phil Angelides joined us to discuss his plan to set up a state
power authority.
We asked
what you thought about the state managing our energy market.
((Mel))
Thank you
for your comments.
((Melissa))
Finally
this week . . . a presidential birthday to mention.
President
Ronald Reagan celebrated his 90th birthday on Tuesday.
You’re
looking at a celebration while he was in the oval office.
The former
California governor is one of only three presidents to reach that milestone…
John Adams and Herbert Hoover are the others.
((Jack))
The Reagans
had a quiet celebration at their Bel-Air home, where he is recovering from
surgery to repair a broken hip suffered in a January 12th fall.
((Mel))
Another
important date is around the corner.
The Reagans
will celebrate their 49th wedding anniversary on March fourth.
((Jack))
That is our
program for this week
Next week .
. . answers to the most frequently
asked energy questions.
((Melissa))
From when
will your bills go down . . . to creative ways to save money, . .
to why are natural gas prices also on the rise?
Until then,
I’m Melissa Crowley.
((Jack))
And I’m
Jack Kavanagh.
We’ll see
you next time.