Negotiations continue for the purchase of San Diego Gas & Electric Co.’s transmission lines by the state, but neither party is saying what stage those talks are in or how much the transaction might cost taxpayers.
Both Art Larson, spokesman for SDG & E;, and Steve Maviglio, spokesman for Gov. Gray Davis, confirmed the negotiations but both said they did not have any additional information on the talks.
The negotiations are part of an over all plan for the state to take over California’s utility grid and bail out the state’s three largest investor-owned utilities. Negotiations are also ongoing with Southern California Edison and Pacific Gas & Electric, Maviglio said.
The plan will provide the utilities cash to pay off debts arising from the high wholesale cost of electricity and retail caps imposed on the utilities. The state, meanwhile, gains control of the grid, Maviglio said.
Maviglio said SoCal Edison has tentatively offered a purchase price of $2.76 billion for its transmission system. Negotiations with PG & E; are continuing.
However, Maviglio did acknowledge other published sources which stated that the governor has reportedly offered PG & E; about $7 billion, while the utility may be asking as much as $10 billion.
The consumer advocacy group Consumers Union released a statement criticizing the $2.76 billion deal with SoCal Edison. Michael McCauley, spokesman for the organization, said that although he supports state ownership of the transmission lines, he was “alarmed” at paying SoCal Edison more than twice their book value.
“(This) offers far too much money and fails to require the utility’s parent company and the energy companies who have profited from California’s energy crisis to make a meaningful financial contribution toward ending it,” he said.
Also, if the SoCal Edison deal serves as a model for future deals with PG & E; and SDG & E;, consumers will be stuck with higher monthly utility bills to pay for the costs of buying the transmission lines, McCauley said.
Michael Shames, executive director of the Utility Consumers’ Action Network, was more optimistic. He supported the proposal, but added that he was concerned about how much it might cost, calling it “the $7 billion question.”
“Transmission line purchases make a lot of sense. But you have to make sure the amount of money you pay for the purchases doesn’t exceed the ability of the transmission lines to recover that revenue,” he said.
State ownership of the transmission lines has several benefits. For one thing, it would give the state more autonomy, reducing the amount of control the Federal Energy Regulatory Commission has over California’s energy policy, Shames said.
It would also make the California Independent System Operator more accountable and ultimately save the state money, he said.
There are other benefits, he said. For example, SDG & E; has long wanted to build a transmission line through Rainbow Valley. The line would help make more power available to San Diego County, but Rainbow Valley residents vigorously oppose its construction.
However, with state ownership of transmission lines, the region may see additional power , without having to build the Rainbow Valley line, Shames said.
“The state may be able to more effectively deal with other municipalities that own lines , for example the Imperial Irrigation District , and possibly be able to get better cooperation and better utilization of their lines, thus reducing the need for (the one at) Rainbow Valley,” he said.
Shames added that in the long run, the purchase of the transmission lines doesn’t really cost the state anything. Currently, the state is leasing the lines at a cost of $1.4 billion annually.
“The beauty of the proposal, actually, is nothing changes. The state currently has the ISO running the lines; it would continue to. The investor-owned utilities currently maintain the lines; they would continue to,” he said.
State ownership of the transmission lines is a vital component to making electricity deregulation work in California, Shames said.
“The market can’t function without the basic infrastructure. The transmission lines are very much the highway that allows commerce to function or not function, as the case may be. So he who controls the highway, controls the key to whether a viable wholesale market is possible,” he said.
