Senate Democrats said Monday that the state should use part of a projected $10.3 billion budget surplus to try to hold down electricity prices, possibly by building new publicly owned power plants. Senate Budget Committee Chairman Steve Peace, speaking for Senate Democratic leaders, proposed that lawmakers and Gov. Gray Davis set aside $2 billion for energy initiatives that could include taking over existing power plants or building new ones. "We want to assure that Californians are not the subject of outright extortion from out-of-state energy companies," said the El Cajon Democrat.
But Jan Smutny-Jones, executive director of the Independent Energy Producers group, said the $2 billion could be better spent "either on public schools, relieving congested highways or giving it back to taxpayers."
"The power plant business will take care of itself," he added, saying that four new plants are under construction now.
In a related development, the state Energy Commission said California should be able to meet its electricity needs next summer unless it has unusually hot weather.
But the commission said California would continue to need new power facilities and energy conservation efforts to keep up with annual 2 percent increases in demand.
Electricity rates have been a hot issue in California since San Diego Gas & Electric Co. customers were hit with huge power bills this past summer.
SDG&E was the first California's top three privately owned utilities to complete the transition to the deregulated electricity market mandated by a 1996 law.
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That statute - which Peace helped draft - was supposed to lower costs by adding competition to the system. It requires investor-owned utilities like SDG&E to sell off its assets, including power plants, by March 2002 and to buy its power on the open market.
Davis has urged the Federal Energy Regulatory Commission to order ratepayer refunds in San Diego and to impose wholesale price controls in California.
The federal regulators say the San Diego prices were "unjust and unreasonable" but that they don't have the power to order refunds.
Peace blamed the high rates on "outright market manipulation" and said some companies were arguing that FERC should keep wholesale rates high to ensure new power plant construction.
He also said some companies wanted to use the current situation to try to weaken California environmental laws, a claim Smutny-Jones denied.
Peace said he wasn't making any recommendations on how to use the $2 billion, but that a publicly owned power plant could provide power cheaper.
He said it would cost about $300 million to build a 500-megawatt plant and about $60 million to build a 100-megawatt plant that would be used during periods of high electricity demand. Other options include taking over power transmission facilities. Davis' office did not have an immediate response to the Peace proposal.
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