New California agency wins broad energy financing authority

A newly created California Power Authority will have broad powers to finance, build, own, and operate power plants and finance natural gas pipelines and storage projects. Signed into law Wednesday by Gov. Gray Davis over Republican opposition, the bill also grants the new agency power of eminent domain and gives it authority to issue up to $5 billion in bonds for various energy projects, including conservation.

May 17th, 2001


By the OGJ Online Staff

HOUSTON, May 17 -- A newly created California Power Authority will have broad powers to finance, build, own, and operate power plants and finance natural gas pipelines and storage projects.

Signed into law Wednesday by Gov. Gray Davis over Republican opposition, the bill also grants the new California Consumer Power and Conservation Financing Authority power of eminent domain and gives it authority to issue up to $5 billion in bonds for various energy projects, including conservation.

Davis said the state's direct participation in California's energy markets will "help dampen wholesale energy costs and ensure an adequate supply of energy. This bill gives back to California the power to control its own energy destiny."

Under the law, the agency must submit a 10-year investment plan for gas and electricity to the governor and legislature within 6 months. The plan, to be developed in conjunction with the California Independent System Operator and the State Energy Resources Conservation and Development Commission, must address "issues regarding adequacy of supply, storage, reliability of service, grid congestion, and environmental quality."

The law directs the agency to take into account comparative costs of various energy resources, including a comparison of demand reduction strategies vs. new generation supplies. In addition, it must "acknowledge the volatility of fossil fuel prices and the value of resources that avoid that price risk."

It must outline a strategy for "cost-effective" energy resource investments, using the financing power provided the authority. It will be up to the power authority to insure the investment strategy recommendations are implemented and adhered to.

Within 90 days, the new agency in consultation with the Public Utilities Commission and the conservation and development commission also must report on the "present, planned, and required future capacity of the state's natural gas transportation and storage system" to supply "competitively priced" natural gas to "residential, commercial, and industrial customers, including, but not limited to electric generating plants."

Power projects financed by the authority must agree to supply power at cost to California consumers, but the law permits excess electricity to be sold outside the state "at just and reasonable prices." The law also allows owners of existing plants to apply for financial assistance to upgrade facilities.

However, the agency may only invest in nuclear and hydroelectric projects, if there is specific statutory authorization on a project-by-project basis.

Under a renewable energy and conservation provision, the law permits the agency to lend up to $1 billion on business and consumer energy efficiency projects and appliances. The law prohibits the agency from financing or approving any new projects after Jan. 1, 2007, without the legislature's approval.

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