END OF THE LINE RATEPAYERS FOOTING THE ENERGY BILL.

Byline: Richard Nemec Local View

IT might never be fully calculated, but our tate policy-makers' decision late last year to seek a political solution to California's admittedly complex electricity problems has cost us dearly. How much?

State power purchases will pass the $2 billion mark early in March. That's already 20 percent of the estimated $10 billion state budget surplus.

However, utility consumers and taxpayers - you and I - eventually will return the dough to the state with the millions of dollars of transaction charges tacked on for a projected record public sector bond sale of up to $10 billion. Fees alone for the underwriter promise to be $40 million to $50 million, depending on what sort of deal the state can negotiate.

It is worth remembering that last fall the two now-deeply-in-debt private sector utilities, Southern California Edison Co. and Pacific Gas and Electric Co., were offering rate stabilization options that would spread out the costs to ratepayers over the next five years.

For Edison's residential customers, excluding low-income ones who were exempt for the increase, the added cost would have totaled about $1.5 billion, saddling the average residential customer with a $6 increase in their monthly power bill.

State regulators turned down the idea flat.

Our governor drew a line in the sand early and said no rate increases. He was hoping the federal energy regulators would extract refunds from generating plant owners, whose profits and stock prices have soared on the volatility of the Western wholesale power market since last summer.

It didn't happen.

Gov. Gray Davis wants so badly for voters to believe his solution is a courageous success story. That remains to be seen. Regardless, the state's energy industry, consumers and taxpayers will be forever changed.

State leaders are eager to buy the private sector's transmission grid and lease it back to the utility owners to operate and maintain. Contracts previously held by the state-chartered grid operator, Cal-ISO, with credit backing from the largest private utilities, are now being transferred to the state Department of Water Resources, with added administrative and commercial cost.

The outstanding legislative schemes to make the utilities whole, establish a state power authority and buy-down excessively priced renewable energy and cogeneration contracts carry a price tag of $20 billion to $25 billion in state-backed or utility bonds.

The average cost per citizen in the state of just the first $10 billion in bonds is estimated to be close to $600 for every man, woman and child living here - a far cry from Edison's original $6 rate increase proposal.

In clearly a Freudian slip of the tongue, Davis now regularly refers to the state water agency as California's ``DWP''- Department of Water and Power.

To a very real extent, this new state acronym indicates that Californians' relationship with their state government has been significantly altered.

And what's the result? It's unclear if the same wealthy energy players who rushed to California in 1995-96, when the state law opened up the electricity industry, will be rushing to build plants for the state to own and operate.

The investment community and energy companies themselves in recent weeks have talked more negatively about California as a place to do business. This certainly was not the incentive behind the industry restructuring that is often wrongly labeled as ``deregulation.''

It didn't have to be this way. While the market went haywire, driving costs out of sight starting last summer, by August most of the problems were identified and solutions were under way that could have avoided the economic and political crisis that we have endured this winter.

As it now stands, California consumers will pay a lot more than they should have so our leaders can look and act politically correct.

CAPTION(S):

2 photos

Photo: (1 -- color) The average cost of just the first $10 billion in bonds is estimated to be close to $600 for every citizen living in California.

Walt Mancini/Staff Photographer

(2 -- color) Gov. Gray Davis wants voters to believe his solution is a courageous success story.

Rich Pedroncelli/Associated Press