Davis on Tuesday directed state regulators to cut the price of power charged to the state's three largest utilities by the Department of Water Resources by a combined $1 billion and then pass the savings on to consumers.
The rate cut would affect customers of Pacific Gas and Electric Co., San Diego Gas and Electric Co. and Southern California Edison Co. The three companies provide electricity to more than 9 million people statewide.
"The critics said the answer to the energy crisis was to pass along 400 percent increases in rates, but my plan from the get-go was to keep rates down and not let them go up," Davis said. "We are putting money back in the hands of ratepayers instead of into the coffers of energy companies."
Davis said the rate cut would be based on the overall savings that came from the return of the utilities to the power markets earlier this year.
The DWR had taken over the purchasing of wholesale electricity in 2001 as record energy prices shattered the credit ratings of the utilities. The move allowed the companies to buy power from the DWR. Earlier this year, the state allowed the companies to begin purchasing power on their own.
Davis said he asked the state Public Utilities Commission to order that the reduction of the DWR's rates be passed on to the consumers as soon as possible - probably sometime in the early autumn.
"This is very good news for consumers, and the commission will do everything it can to expedite the process," PUC President Michael R. Peevey said in a statement. "The PUC has 120 days to act on DWR's revenue requirement from the day in which it is submitted."
As a result of the rate decrease, residential customers would see a savings, on average, of approximately $30 as year, while small businesses would see an average of $60 to $120 a year.
Southern California Edison's request to lower rates by July 1 is pending before the commission, the statement said. The reduction in rates as a result of the DWR's lowered revenue requirement is an additional reduction that could also take place as early as July.
San Diego Gas and Electric customers could see their rates lowered by August. Because Pacific Gas and Electric chose to enter into bankruptcy, its customers would receive a rate decrease when the company emerges from bankruptcy.
Lower electric bills may be the last good news California consumers get from Sacramento for some time.
Davis is scheduled to unveil a new budget plan Wednesday to deal with the state's gaping budget deficit, which will reportedly include a half-cent increase in the sales tax and higher vehicle licensing fees.
The Sacramento Bee reported Tuesday that the governor planned to propose the floating of bonds that will raise money immediately and be paid off over time by a half-cent increase in the sales tax.
According to the Los Angeles Times, Davis also will seek a vehicle registration hike that could average as much as $136 per vehicle. The increase will give Davis the $4 billion in revenues he needs to avoid some Draconian cuts to education, a pet concern of his urban, Democratic core support.
Observers said Davis has decided to risk the wrath of conservative Republicans by raising taxes because cutting programs would create even greater fallout among the voters and a hike in the income tax is politically out of the question.
"Let's say he doesn't do it and cuts $4 billion," Assemblywoman Jackie Goldberg posed to the Times. "You don't think that's going to (anger) people?"
Davis and his administration have maintained that the state's budget woes were primarily the result of the economic downturn that hit California early and hard, slashing capital gains and income tax revenues that had swelled during the high-tech boom of the 1990s.
Steve Peace, Davis' finance director, told reporters on a conference call Monday that California, like many states, was facing a growing demand for services due to the economy at a time when revenues were lagging.
"We're a little under in revenues, and expenditure levels are a little bit up due to caseload growth," he said as he deflected direct questions about the state of the state's finances. "We'll address those questions on Wednesday."
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