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Energy Legislation moves forward for the public takeover of power utilities

If there’s any indication as to whether deregulation of electricity has worked in this state, consider how many proposals are floating around pressing for state ownership of power plants.

First up is AB-35XX, carried by Assemblyman Juan Vargas, D-San Diego. The bill would authorize temporary state takeovers of power plants for two years.

So far the bill has cleared the state Assembly’s Judiciary Committee, 6-3, largely along partisan lines. It next goes before the Energy Costs and Availability Committee, said Colin Rice, Vargas’ chief of staff.

Rice described the rationale for a two-year takeover in AB-35XX.

“The one major problem of a permanent takeover is it leaves the state (with) having paid out a ton for a series of depreciating assets. The temporary takeover is better because we only would have to pay a reasonable rental value,” he said.

The power plants would revert to private ownership at the end of those two years , by which time there would be more power plants on line in the state. The added supplies would calm the markets, Rice said.

Rep. Bob Filner, D-San Diego, meanwhile, is sponsoring a federal bill to encourage public ownership of power plants. HR-2233 would remove an important obstacle from municipal entities setting up public utilities or purchasing a power plant.

“Apparently there’s a restriction on the use of tax-exempt bonds to acquire generation facilities,” he said. “We repeal that restriction in this bill, so you can use tax-exempt bonds, which is one of the best weapons for a municipal agency.”

The bill would also create a Community Power Investment Revolving Loan Fund, which would provide loans for feasibility studies, distributed generation, transmission systems and other investments in local power.

Filner noted that he is working to encourage San Diego city leaders to build a power plant here. The San Diego Community Power Project, as it’s called, would help to build a 1,000-megawatt power plant locally.

That’s about one-third of San Diego County’s energy needs and would give the city the leverage it needs when dealing with other generators, he said.

There are several benefits to public ownership. The cities of Los Angeles and Sacramento were spared from both rolling blackouts and price shocks in the past year because they have municipal utilities and supply their own power to residents and businesses, Filner said.

Other benefits include the fact that public power utilities answer directly to the communities that own them. They have lower administrative costs and pay no dividends to stockholders, so customers of public power end up paying less, he said.

“San Diego County would be served much better by a municipal utility,” Filner said. “This legislation makes it much easier for communities to control their own energy futures.”

A third maneuver, though having no direct impact on private ownership of power plants, could help promote state ownership at a later date.

Kathleen Connell, state controller and Board of Equalization chair, said June 20 that the state should seize control of the authority to tax power plants within the state. The motion was approved unanimously by the equalization board and takes effect immediately, said Lisa Casalegno, a spokeswoman for Connell.

Under the current system, responsibility for assessment is divided between the state and counties. But taxes assessed by counties are subject to Proposition 13, while taxes assessed by the state are not, she said.

The move, jump-started by state plans to purchase transmission lines and generating facilities, allows the state to implement a consistent taxation program on energy facilities statewide, Casalegno said.

Should the state subsequently move to take over power plants, the county assessment would not apply. The move by the Board of Equalization ensures that all generating facilities are brought under the same assessment system.

The other advantage of the new system is that it puts power plants under tighter state control, Connell said.

“Consumers are faced with paying for the energy crisis, and because of that the board made a decision to take action. Now we will be in a position to determine if the current taxation (on power plants) is appropriate, and if it is not we will have a recourse to make adjustments and bring additional tax revenue into the general fund,” she said.

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