California approves power plan

California's power grid came close to collapse

By Peter Bowes in Los Angeles

The California State Assembly has passed a multi-million dollar rescue plan aimed at easing the state's electricity crisis.

The plan means the state assembly will be able to buy and sell power - a move which is expected to prevent further blackouts.

This is a gigantic leap forward for California. This measure offers our best hope of avoiding electricity rate increases in future years

Governor Gray Davis

Soaring energy costs and a failed attempt to deregulate the state's power market has pushed two electricity companies close to bankruptcy.

A state of emergency was declared in California in the middle of January when the area's power grid came close to total collapse.

With two of the main electricity suppliers unable to afford to buy power on the open market, many homes and businesses suffered the effects of massive blackouts - a desperate measure to conserve energy.

Cheaper electricity rates

The plan empowers California's department of water resources - the state's largest buyer of electricity - to sign long-term contracts with suppliers.

California is on a power alert

The aim is to secure rates which officials hope will be far lower than the current prices being charged on the energy market.

One controversial provision gives the go-ahead for an increase in electricity rates for some consumers.

Conservation plan

This will apply to those who use power in excess of a baseline rate which is deemed sufficient for running an average home.

Under the terms of California's 1996 power deregulation law, the electricity companies were banned from passing on soaring prices to their customers.

The state governor, Gray Davis, has also unveiled an $800m energy conservation programme which is aimed at sharply reducing electricity demand during the Summer months.