State Must Get Out of Electricity Business.

IF the Legislature fails to act on two key energy-related issues, California will have taken a major step toward establishing a government-run, statewide utility system.

Given the complexity and politically charged nature of the electricity market quagmire, some openly advocate a state-run system as a legitimate solution.

But a state-run system is hardly in the best long-term interest of electricity consumers, state taxpayers or California's economy. One need only look at other state-operated systems (departments dealing with transportation, motor vehicle registration and veteran affairs come to mind) to imagine the operations of a state energy authority.

The state of California's involvement in the business of buying electricity already has been a nasty experience for taxpayers. Yet that is exactly what state officials have been forced to do, and could be forced to do in the indefinite future, because California's utilities lost their investment grade credit status and the Legislature has failed to take action.

California has spent billions of public dollars to underwrite the cost of electric energy for homes and businesses, and until bonds are sold, taxpayers, public schools and transportation programs remain at great risk.

In addition to the billions of tax dollars fronted for electricity purchases, no one has yet calculated the economic impact of the near paralysis in state government that has delayed much needed attention and resources to priority issues of California residents.

Members of the Legislature must be single-minded in getting state government out of the electricity buying business. There is only one way to accomplish this: Pass legislation to return Southern California Edison to investment-grade credit status.

Ideally this legislation will serve as a model to expeditiously bring PG&E to financial health. Only then will the utilities be able to resume the hard job of buying and selling power in the most economically efficient way.

This is the best strategy to assure direct access for large industrial energy consumers, so they can choose their energy supplier or generate it themselves. State government procurement of electric energy on a long-term or permanent basis will have damaging consequences for taxpayers and the economy.

The Legislature also must allocate responsibility for energy costs equitably while sheltering residents who are truly in need.

For more than a year, the California energy crisis has been aggravated by the failure of policy makers to allow the commodity cost of electricity to flow through to business and residential consumers. Attempting at this point to load all under-collection costs on business in order to insulate most residential consumers from the realities of the California energy market discourages conservation and jeopardizes the fiscal health of the state. Economic investment and jobs in California depend on an equitable allocation of costs. Failure to meet this state's electric energy needs as soon as possible will cost California jobs and worsen the already-slowing economy as businesses move to other, more capable regions of the country.

Larry McCarthy is president of the California Taxpayers' Association.