A Comprehensive Solution to Californias Electricity Crisis May

A Comprehensive Solution to California’s Electricity Crisis May 11, 2001

Time Is Running Out: California Must Move to Resolve the Crisis • • The crisis has dragged on for over a year A total solution continues to elude California Yet the components of a solution are clear Absent swift resolution, the State faces an economic, financial and political catastrophe • The political environment is impeding resolution • California’s business leaders must engage 2

The Solution’s Components • Return the utilities to creditworthiness—retail rates must reflect costs • De-politicize the procurement function—quickly remove the State from the power-buying business • Increase supply—streamline plant siting • Decrease demand—provide financial incentives to decrease consumption • Resolve pricing allegations and create an attractive investment climate—current legislation, investigations, etc. are chasing away capital; turn instead to settlement 3

The MOU Can Solve the Creditworthiness Problem—EDISON Proposed Rate Structure for Edison Having the State purchase utility transmission is bad public policy and lacks political support. 4

The MOU Rate Structure Can Also Return PG&E to Creditworthiness 5

De-politicize the Procurement Function • Return the procurement function to the utilities within 6 -12 months • Re-instate consumer choice (“Direct Access”) for ALL consumers immediately • Establish “core/noncore” market structure, consistent with California’s gas market, within 18 -24 months – Businesses have procured their own gas supplies for 10 years – The program has been very successful – The core/noncore structure keeps input decisions and cost control with business, rather than in the hands of the California PUC 6

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The Solution Requires Leadership from Business • • A comprehensive solution is within reach Political partisanship stands in the way Solving California’s crisis is a nonpartisan issue The time is right for the business community to speak out • Contact political leadership – Urge a bi-partisan solution – This proposal offers an opportunity to get deregulation right in California 9