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California Hikes Power Prices – Gray Davis Speech

The Governor of California Gray Davis has just given a speech on radio and television (6pm PDST), in which announces large power price rises ranging from 10% to 34% for business and heavy power users.


Good evening. I'm speaking to you tonight from Sacramento on the most difficult issue facing California: our energy crisis.

Simply stated, we have two problems: supply is too low and costs are too high. Both result from the flawed deregulation scheme created in 1996. But no matter how we got into this mess, you hired me to solve problems. And that's what I'm doing.

The only long-term solution is to build more power plants. We must also cut back on consumption and stabilize the utilities. But prices won't fall and supply won't be truly reliable until we generate more power than we consume.

Yet in the 12 years before I took office, not a single major power plant was built in California. Not one. Since I became Governor, we've licensed 12 major power plants. Ten more are in the pipeline. And we're doing this without weakening our commitment to clean air and clean water.

Deregulation required the utilities to sell off many of their power plants to independent generating companies. The generators are free to charge whatever they want because they're governed only by federal regulators who refuse to control wholesale energy prices.

This past winter, the prices charged by the generators shot through the roof, driving the utilities to the brink of bankruptcy.

In January, with the feds still refusing to do their job, California stepped in to purchase the power the utilities could no longer afford to buy. We didn't take over to save the utilities. We took over to keep the power on and the economy strong. That's not all:

* We also negotiated long-term contracts for electricity at vastly lower prices.

* I used my emergency powers to seize control of low-cost power contracts the utilities were about to forfeit to the generators.

* We began negotiations to buy the utilities' transmission system.

* We cut red tape and offered cash incentives to speed up construction of power plants.

* We're launching an $800 million conservation program.

We're moving to establish a public power authority to build more power. If the private sector fails to build all the plants California needs, we'll build them ourselves.

* And because I share your concern that the generators are ripping us off, we're using every legal remedy to root out and punish illegal conduct.

We can't fix 12 years of inaction overnight. But we're making real progress.

Now, as you know, I have fought tooth and nail against raising rates. It's become increasingly clear, however, that with rising natural gas prices, the feds' failure to control costs, and the state's lack of supply, that some rate increases are needed to keep our lights on and our economy strong.

But I remain committed to protecting average Californians from massive rate hikes. So I'm urging the Public Utilities Commission to adopt a plan that will protect average consumers, reward those who conserve and motivate the biggest users to cut back.

Under my proposal, more than half of you won't pay a penny more. For the rest, the average increase will be 26 and a half percent. For many of that group, rates will rise only about 10 percent. The heaviest users will see their rates rise 34 and a half percent on average. That includes business paying their share. This is in addition to the 9 percent surcharge we've all been paying since last winter.

But all Californians can reduce their bills through conservation.

Here's the point: The more you use, the more you pay. The more you conserve, the more you save. Conservation is our best short-term weapon against blackouts and price-gouging. By flexing your power, you'll help secure our energy future.

Unlike the Public Utilities Commission, my plan includes funds to restore the utilities to financial stability -- If they agree to three main conditions:

They must provide low-cost regulated power to the state for 10 years. Agree to sell us their transmission system. And dismiss their lawsuits seeking to double your electricity rates.

My proposal raises rates fairly, assures us of long-term power, stabilizes the utilities and promotes conservation.

Our emphasis on conservation is critical. In order to make it through the summer, we must cut demand by at least 10 percent.

Already we've launched programs to cut back commercial lighting, and reduce consumption in office buildings, schools and government facilities.

Friends, we have a power shortage but we are far from powerless. We are 34 million strong and if each of us does our part, we can minimize disruptions and get through the summer. We are Californians. We've withstood earthquakes, floods, fires, and droughts.

Yes, this mess is man-made, but with your help and God's blessing, we'll get through this as well.

Thank you and good night.


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