Calif. Governor vetoes state aid for San Diegans

California Gov. Gray Davis vetoed a bill that would have handed over $150 million of taxpayer money to San Diego Gas & Electric Co. in 2003 to reduce consumer electric bills. In his veto message, the governor said the bill was 'premature, sets a troubling precedent, and encourages merchant generators and energy traders to continue to act unreasonab[ly].'


Ann de Rouffignac
OGJ Online

California Gov. Gray Davis vetoed a bill that would have handed over $150 million of taxpayer money to San Diego Gas & Electric Co. in 2003 to reduce consumer electric bills.

In his veto message, the governor said the bill was �premature, sets a troubling precedent, and encourages merchant generators and energy traders to continue to act unreasonab[ly].�

Throughout the summer, keeping the lights on in California challenged the California Independent System Operator on a daily basis and electricity wholesale prices spiked into the triple digits. Legislators called for monetary relief for consumers in the San Diego area who were suddenly saddled with electric bills that had tripled in cost. California state legislators and congressional representatives called on the Federal Energy Regulatory Commission (FERC) to investigate the wholesale pricing procedures in the deregulated California market. FERC�s investigation results are expected in November.

Davis, a Democrat, also called on FERC to reduce price and bid caps on wholesale power sold in California.

"The current path of unconscionable wholesale energy prices is unacceptable for ratepayers and California�s utilities," said Davis in his veto message.

Wholesale electricity transactions were capped at $250/Mw-hr after a bitter battle among members of the California Independent System Operator�s board this summer. Those caps have been approved by FERC and Davis now wants the cap reduced even more.

He reasons that even lower caps on wholesale electricity prices will help keep the incumbent utilities healthy. State regulators have already imposed a retail cap of 6.5�/kw-hr for consumers in the San Diego area. Retail caps will protect consumers through 2002, but San Diego Gas & Electric Co., a unit of Sempra Energy, must still deal with volatile wholesale markets when it buys electricity for its customers and cannot pass those costs through.

In his veto message, Davis called upon FERC to complete its investigation of the California wholesale market and noted the difficulty of keeping utilities financially healthy under existing circumstances�volatile wholesale electric prices that are subject to a consumer rate cap.

�California�s consumers have a legitimate need for California�s utilities to remain solvent and the state must be committed toward that end," he said. Without financially healthy utilities, no California-based entity will exist that will be sufficiently solvent to invest in the new electrical generation and transmission facilities necessary to solve our energy problems.�

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