California governor lets state buy electricity to drive down prices.(Chicago Tribune)

LOS ANGELES _ In the first major alteration of the state's disastrous five-year-old experiment with power deregulation, California Gov. Gray Davis on Thursday signed a law authorizing the state to enter into long-term contracts

to buy electricity in the hope of driving down prices and solving the state's energy crisis.

The move does not reverse the 1996 deregulation law, but modifies a key provision requiring private utilities to buy electricity on the often-volatile spot market.

More important, the $10 billion law for the first time puts California in the power-buying business, using its good credit to purchase electricity for two private utility companies teetering on the edge of bankruptcy. One of the companies, Pacific Gas & Electric, reported to the U.S. Securities and Exchange Commission Thursday that it cannot pay $1 billion in debt incurred buying power for its customers.

Even before it passed Thursday afternoon, the measure was assailed by Republicans in the Assembly and consumer groups for a provision authorizing the Public Utilities Commission to raise customer rates to help bail out the private utilities and repay the bonds the state would issue.

Indeed, after a marathon session Wednesday that stretched to 3 a.m. Thursday, the measure initially lost in the Assembly by three votes. The Senate passed the bill earlier Wednesday.

But the Assembly regrouped Thursday afternoon and passed it 54-25, the minimum needed for a two-thirds majority required in this case. After working the phones all morning, Davis and Democratic leaders in the Assembly persuaded one Democrat and two Republicans to switch their votes.