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Failure to Buy Entire Network May Doom Davis' Power Deal 

By MIGUEL BUSTILLO and NANCY VOGEL, Times Staff Writers 

SACRAMENTO--Does it make sense for California to own only part of the state's 
power grid?
That question is dividing state legislators and energy experts after Gov. 
Gray Davis' announcement of a $2.76-billion deal to buy Southern California 
Edison's transmission lines. The deal was reached Monday, three days after 
Pacific Gas & Electric Co. balked at selling its power lines to the state and 
filed for bankruptcy.
Davis and Democratic legislators have pushed to purchase the whole 
transmission system owned by the state's debt-saddled private utilities. They 
reason that by owning the highway that electricity must travel to reach homes 
and businesses--a 32,000-mile web of wire that is the world's fifth-largest 
coordinated power grid--the state would gain a negotiating advantage with the 
companies that produce the power.
If California's transmission grid were entirely owned by the public, 
political leaders believe, the state could gain jurisdiction over key 
electricity issues now decided by the Federal Energy Regulatory Commission, 
which has been reluctant to intervene in the energy crisis. The state, not 
the commission, could then set its own transmission fees and control the flow 
of electricity across the grid.
Transmission charges bring in roughly $1.4 billion a year for the three 
utilities. With that money, the state could not only repay itself for the 
purchase of the power lines but also fund system upgrades to unclog 
electricity bottlenecks that contribute to blackouts.
"Owning the wires is a business, and this business operates at a profit," 
said Assemblyman Roderick Wright (D-Los Angeles), who will head a series of 
committee hearings on the plan to buy the Edison lines. "We're not going into 
their yards and buying old trucks or something; we are buying a vital piece 
of their electrical system."
However, now that Pacific Gas & Electric has opted to try to find a solution 
to its debt problem in Bankruptcy Court rather than continue negotiations 
with the state, the prospects of California acquiring the entire system 
appear uncertain at best.
That is generating concern about what California is getting for its 
money--and whether the state stands a chance of gaining any independence from 
federal regulators--if it buys only the lines of Edison and San Diego Gas & 
Electric. 
The Edison deal, which needs legislative approval, is unlikely to garner a 
single vote from Republicans--Assembly Republican leader Dave Cox (R-Fair 
Oaks) calls the grid purchase a socialistic idea. The plan may also encounter 
some Democratic opposition.
"It was a tough sell to begin with, and I think if you are going to only buy 
part, it becomes a tougher sell," said Assemblyman Dean Florez (D-Shafter).
And some utility experts say California gains little, if anything, unless it 
acquires the whole system.
"The motivating factor for buying the grid, as opposed to hydroelectric power 
plants, is because it addressed the central problem facing California: The 
federal government is unwilling to crack down on the generators that are 
ripping us off, and we need to take back control," said UC Irvine professor 
Peter Navarro. "If you only buy 40% of the system, you might as well have 
nothing."
California would not be able to make some of the most critical upgrades 
needed to improve the flow of electricity if it did not acquire PG&E's 
portion of the system. The worst energy bottleneck in California is the 
notorious Path 15, a series of high-voltage lines that move power between 
Southern and Northern California. Path 15 lies largely in PG&E's territory.
Davis and some state legislators say California still has a chance to buy the 
entire grid. Some, in fact, believe that the utility's bankruptcy increases 
the likelihood of a deal: Talks between Davis and PG&E had faltered in recent 
weeks, and a judge may have better luck bridging their differences.
Negotiations between the state and San Diego Gas & Electric continue, leaving 
the possibility of a deal with that utility.
But acquiring PG&E's portion, the largest and most important by far, now 
requires the approval of a federal Bankruptcy Court judge. And in that arena, 
the state may have to compete with private companies for the lines.
Trans-Elect, a Washington company that wants to create a national network of 
independently owned transmission lines, has offered to buy and operate the 
grids of Edison and PG&E for a total of $5.25 billion. The company has also 
been in contact with the Davis administration on the possibility of leasing 
the lines from California if they are bought by the state.
For the state to buy any of the systems, it needs approval from FERC--far 
from a sure thing. The commission in recent years has encouraged states to 
put management of large sections of the nation's transmission grid into 
private hands to achieve more efficient electricity flow. Even if the 
commission approved the purchase, the state may not receive any increased 
powers.
"FERC would like to see one large regional transmission system in the West," 
said David Clement, a transmission expert with Cambridge Energy Research 
Associates. "If FERC were to unconditionally approve the sale, then the 
transmission system owned by Edison would leave FERC authority. However, FERC 
could easily condition the sale such that the transmission grid remains under 
their authority."

Copyright 2001 Los Angeles Times