Maintain open access, Abraham says of California transmission plan

US Secretary of Energy Spencer Abraham said the DOE would not stand in the way of California Gov. Gray Davis's plan to buy the transmission systems of the state's investor-owned utilities. After weeks of quiet in Washington about the controversial proposal, Abraham wrote Davis a letter explaining the Bush Administration�s point of view.

Mar 16th, 2001


By the OGJ Online Staff

HOUSTON, Mar. 16�US Secretary of Energy Spencer Abraham said the DOE will not stand in the way of California Gov. Gray Davis's plan to buy the transmission systems of the state�s investor-owned utilities.

After weeks of quiet in Washington about the controversial proposal, Abraham wrote Davis a letter explaining the Bush Administration�s point of view.

�The administration does not propose to tell the state how to restore the utilities� financial health,� he said in a Mar. 15 letter. �We recognize and respect the state of California�s prerogative to determine how to restore the financial health of your utilities.�

Abraham said the administration will not oppose the concept of the purchase, but, he said, such a transaction will still be subject to state legislative approvals, federal, and state agency approval, including the Federal Energy Regulatory Commission, the utilities, and their shareholders.

Davis has already negotiated an agreement in principal for the state to buy Southern California Edison Co.�s transmission system for $2.8 billion, but details have yet to be fleshed out.

In a conference call Friday, an official with Southern California Edison said discussions are ongoing with the governor's office. He said there is no single outstanding obstacle holding up the negotiations.

There has been no preliminary agreement with Pacific Gas & Electric Co. But that utility said Friday �progress� has been made on a deal with the state. No agreement has been reached with San Diego Gas & Electric Co., the third investor-owned utility said to be negotiating a deal.

Davis�s plan would give the utilities an immediate injection of cash to pay debt obligations in default and to pay for power purchased but still unpaid since November 2000.

Sources said Davis could not move forward with his rescue plan until he knew where the new administration stood on it. While FERC is an independent agency, it takes its tone and approach from the incumbent administration. The agency has been silent on the proposal since it was first announced by Davis last month.

Abraham briefly outlined the administration's position in his letter to Davis.

�Our view is that any approval of the proposed purchase should ensure continued open access to the utilities' transmission systems in order to maintain effective wholesale competition in the region. For that reason, the administration would urge FERC to condition any such sale on adherence to open access requirements,� Abraham said.

While negotiations to resuscitate the utilities have dragged on, some creditors are growing impatient. A Nevada federal judge granted Caithness Energy LLC a $20 million lien against Southern California Edison's interest in the Mojave power plant. Qualifying facilities, or independent power plants such as Caithness, have not been paid for power produced and delivered to the utilities in months.

"We believe the court is wrong," Southern California Edison attorney Barbara Reeves said during the Friday conference call.

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