Governor Says Energy Crisis Not Over

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Jan. 9, 2004 Share this on FacebookTweet thisEmail this to a friend

In January 2001, then-Governor Gray Davis devoted a significant portion of his State of the State address to California's energy situation. Three years later, on Jan 6, 2004, Davis’s successor urged lawmakers not to forget about California's energy woes. In his first State of the State address, Governor Arnold Schwarzenegger said that the energy crisis is not over and that California's approach to energy is a “barrier to jobs and economic growth.”

“Our businesses pay energy rates nearly twice as high as those in other western states,” said Schwarzenegger, who also called for reforming the retail power market “so large customers can get competitive prices.”

Retail direct access (DA) was suspended in 2001. Several legislators have indicated they will carry legislation this session to lift the suspension and reinstate DA. Reinstating DA would provide significant economic and reliability benefits, both for large energy users and the economy as a whole. DA reduces the cost of doing business in California by allowing businesses to manage their energy costs, and establishes a competitive benchmark price against which the cost of bundled utility service can be evaluated.

The governor also warned of future energy shortages, perhaps as soon as 2006, if action is not taken soon to attract new energy investment.

Since the 2001 crisis, nearly all of the new power plants slated for construction have been postponed or canceled due to a combination of factors: low wholesale electricity prices, the Enron scandal, regulatory uncertainty and reluctance by Wall Street to finance new electricity generation projects.

Bringing more power online is a task as important as any facing California today. Hopefully California's economy will recover soon and manufacturing will pick up again, but none of this will happen if the state doesn't have enough electricity to power this production and growth.

The governor also took aim at the state's “flawed regulatory structure” and the proliferation of energy agencies in recent years, saying, “Something is wrong when it is easier to create energy agencies than power plants.” This is in keeping with Schwarzenegger’s pledge during the 2003 recall campaign to create a uniform energy strategy to encourage private investment in generation and align the state's energy agencies to support that strategy.
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