POWER TO THE PEOPLE - AN INEVITABILITY? STATE ENERGY AUTHORITY ISSUE NEEDS DEBATE OUTSIDE OF CRISIS ENVIRONMENT.

Byline: RICHARD NEMEC Local View

I am betting that California will have a state power authority before 2001 is over and our next string of rolling blackouts are history.

State legislation on an emergency basis was passed recently to authorize California's Water Resources Department to begin signing long-term contracts for electricity to pass on the cut-rate power with no mark-up to private-sector and public utilities in the state. Some of those contracts may be in place momentarily. The department has been buying wholesale supplies on a day-to-day basis to help keep the lights on in these past weeks of daily power alerts, but it is costly.

The state-chartered nonprofit public benefits organization that runs the private sector utilities' transmission grid, Cal-ISO (independent system operator) lost its industry-dominated 26-member ``stakeholder'' board under a new emergency law enacted early last month. The governor now appoints five political friends instead who will keep track of our grid operations, but so far the first appointees don't have an engineer among them.

So, why not have the state get in the power generation and transmission construction and operation business? (The new law, AB 1X, specifically blocks the Water Resources Department from doing this.)

It would compete with, and in some cases maybe even confiscate, some of the private-sector infrastructure as compensation for the state saving Southern California Edison and PG&E's utility from bankruptcy. A proposal by state Senate leader John Burton is expected to emerge soon to have the state take some private-sector utility assets - hydroelectric plants, transmission lines or company stock.

Now that two of the state's three major, multibillion-dollar private utilities are on their knees about to go down for the count, the temptation is to make invalids out of them. Since the state's 1996 deregulation law had already moved them out of the generation business for the most part, except for nuclear and hydroelectric plants the utilities still operate, why not create a power and transmission operator that owes its existence purely to the consumers of the state, with no pressure to perform for shareholders and fat-cat directors?

With Edison and PG&E unable to muster enough cash to continue even buying their own power, the state now is squarely in the electricity buying business, with one auction completed and another on the way. Initial long-term deals were signed in early February.

Private-sector power plant operators with whom I have spoken in recent weeks are not opposed to the concept of a power authority as long as it leaves room for them to compete (or partner with the state), and as long as their existing investments, which collectively number in the billions of dollars, are not the target of state confiscation.

After all, New York state has had a power authority since 1931 when then-Gov. Franklin Roosevelt created it as a means of getting control of the state's hydroelectric facilities. It now operates 10 generating facilities and 1,400 circuit-miles of transmission, selling wholesale power to both public and private utilities and large customers directly - in and outside of the state.

I am not against establishing an authority, per se, but I think the issue should be debated long and hard and outside of today's crisis mentality. The question of the need for this entity should be examined thoroughly.

A power authority must clearly provide something we can't get now in a system that since the deregulation law has produced about nine new power plants under construction or in the final stages of the state energy commission approvals, and another two-dozen in various stages of development.

For the long-term, the state is in pretty good shape. What we need is an agency that can promote the development of more quick-turnaround (six- to nine-month) temporary ``peaking plants'' designed for a two- to four-year existence, spotted in areas that permanent plants would not be sited for environmental and other reasons; and its could build badly needed new transmission with the imprimatur of the state to cut through the siting morass.

If this more limited role, along with the state power-buying and other moves, doesn't stabilize the markets, encourage more competition and eventually better manage shortages in the next two years, then maybe a future legislature should consider a full-blown state authority that would take over hydroelectric power.