UPDATE 2 - Calif. Gov. set to sign bill to cut power rates
(UPDATE: Changes lead to add comments from Gov. Davis spokesman)
By Nigel Hunt 
LOS ANGELES, Aug 31 (Reuters) - California Gov. Gray Davis will sign 
emergency legislation to cut electricity rates in San Diego where a tripling 
in customers' bills this summer has sparked a public outcry, his spokesman 
said on Thursday. 
The bill was passed by the California Assembly by 58 votes to 14 late 
Wednesday. It needed 54 votes to secure the necessary two-thirds majority of 
the Assembly's 80 members required for emergency legislation. 
``He is in favour of the Alpert/Davis bill. If he gets the bill next week I 
suspect he will sign it sooner rather than later,'' said Davis' spokesman 
Steven Maviglio, noting however that he was reserving judgment on a linked 
measure to provide up to $150 million in state funds to help fund the price 
cut. 
The bill was passed by the state Senate on Tuesday. It is sponsored San Diego 
Democrats state Sen. Dede Alpert and Assemblywoman Susan Davis. 
Under rules governing the deregulation of California's power industry, 
customers of Sempra Energy (NYSE:SRE - news) unit San Diego Gas and Electric 
are the first to pay free market rates without a safety net. 
When California deregulated its power markets, rates were initially frozen 
for customers of the state's three investor-owned utilities. The rate freeze 
was lifted for San Diego Gas and Electric customers last year. 
Rates for the state's other two investor-owned utilities, San Francisco-based 
PG&E Corp. (NYSE:PCG - news) subsidiary Pacific Gas and Electric and 
Rosemead-based Edison International (NYSE:EIX - news) unit Southern 
California Edison, remain frozen. 
The proposed legislation establishes a 6.5 cent per kilowatt hour cap on the 
cost of energy for ratepayers, less than a third of the the current ``free 
market'' cost of 20.8 cents. The cap would be retroactive to June 1, 2000. 
Under the bill, the difference between rates paid by customers and the higher 
market-based rates would initially be footed by the local utility, San Diego 
Gas and Electric, which would create a ``balancing account.'' The shortfall 
would then be recouped from customers at a later date. 
San Diego Gas and Electric spokesman Doug Kline said the utility was urging 
Davis to veto the legislation. 
``It is a well intentioned, but seriously flawed bill. It is like ordering a 
shopkeeper to buy a loaf of bread for $2 and sell it to customers for 60 
cents,'' he said. 
The bill would cap prices through December 31, 2002 although the rate ceiling 
could be extended through December 2003 if the California Public Utilities 
Commission (CPUC) finds that it is in the public interest. 
Kline said the utility has estimated the under-collected shortfall would 
amount to around $726 million by the end of 2002. If it were extended for 
another year that shortfall would climb to around $1 billion, he noted. 
He said the bill, if approved, would impact the utility's credit ratings. 
Wholesale prices in the state soared to record levels this summer and as San 
Diego residents saw their bills skyrocket. There were reports that some 
pensioners were even turning off their refrigerators in a bid to keep their 
power costs down. 
The CPUC, which regulates the state's power markets, held an emergency 
meeting last week and voted for a partial cap which limited bills for 
customers for their first 500 kilowatt hours per month of use. 
But a plan for more extensive relief along similar lines to the Davis/Alpert 
bill was defeated in a vote that split along political lines. 
It has been estimated that the plan approved by the CPUC would result in a 
much smaller shortfall of about $77 million. 
The three commissioners who were appointed by former Gov. Pete Wilson, a 
Republican, backed the more modest relief plan, while the two appointees of 
Davis, the current Democratic governor, sought more extensive rate cuts. 
California's power problems are caused partly by increased demand linked to 
the nation's booming economy, with Western states among those showing the 
fastest growth. 
There also have been few power plants built during the past 10 years and, 
although many are now planned, the prolonged approval and construction 
process means most will not come on line before 2002.