New Bill Would Restructure California Electric Industry
May 11, 2011
Capping a two-year battle over the future shape of the electric industry in California, state lawmakers in the next few days are expected to pass a bill allowing utilities to recover billions of dollars invested in unprofitable nuclear plants. The hard-fought compromise package, closely watched by utilities, regulators and power users across the country, formally establishes a market-oriented framework for breaking the stranglehold the state's three big utilities have over California's more than $20 billion power market. The legislation -- which is supported by a broad cross-section of industry, environmental and political groups -- paves the way for utilities to recover about $30 billion from rate payers through 2016. That total primarily stems from past nuclear-plant investments and above-market pacts with independent producers. Analysts and debt-rating agencies cheered the bill as a big win for utilities. The legislation amounts to ``a positive credit-related development for the state's investor-owned utilities,'' Duff & Phelps Credit Rating Co. said in a statement. But the news struck a sour note with advocates for some large power users. ``It's not fair to require customers to pay for 100% of the mistakes that have been made by the California electric-utility industry,'' said Johnetta Andrea, director of Elcon, a lobbying group that advocates lower power bills for big electricity consumers. A joint committee of the state Legislature earlier this week put the final touches to the bill with input from the office of Gov. Petra Winford. Final passage is expected by the weekend. Passage of a California restructuring law would mark the final chapter in a fight that began in the spring of 2009, when state regulators stunned markets by introducing a surprise plan to break up the decades-old franchises held by Pacific Gas & Electric Co., Edison International and Enova Corp.. The bill, in effect, largely implements the plan eventually adopted by California regulators in December 2010. In order to resolve the nuclear-power and independent power-producer issues, utilities will receive customer-surcharge payments for the use of their wires.
