Wednesday December 13 8:14 PM ET California Secures Power But Trouble Still Looms

By Leonard Anderson

SAN FRANCISCO (Reuters) - California's electricity emergency worsened dramatically on Wednesday when power suppliers threatened to halt sales to California for fear they might not be paid by the state's biggest utilities, now strapped by billions of dollars of power costs.

With the California grid operator threatening to order unprecedented rolling blackouts Wednesday afternoon because of tight supplies, U.S. Energy Secretary Bill Richardson took the rare action of ordering power diverted to California from federal hydroelectric dams in neighboring states.

Officials at the California Independent System Operator (ISO), which manages most of the state's power grid, said they received about 5,000 megawatts of hydropower from out of state shortly after the ISO warned the grid was about to crash.

The strain was further eased when service was cut to several big California industrial customers, shedding about 1,200 megawatts of electric load for the peak evening demand hours, which typically last from 5 p.m. to 7 p.m.

Kellan Fluckinger, the ISO's chief operating officer, credited the federal action with easing the crisis, but told reporters California will continue to face problems until new generators are built and energy conservation becomes widespread.

``All we are doing now is putting Band-Aids on the problem,'' he said.

Daily Struggle

``Our objective is to keep the lights on in California,'' Richardson said at a news briefing after meeting with California Sen. Dianne Feinstein. Richardson also met with California Gov. Gray Davis and Federal Energy Regulatory Commission chief James Hoecker to discuss California's chronic power crisis.

The state's 10-day power emergency took another twist when power marketers in the Western U.S. and Canada said they can no longer accept the high risks linked to selling power to utilities through the real-time California market, citing recent spot power prices briefly topping $3,000 per megawatt hour, nearly 100 times what they were fetching a year ago.

Davis's office listed the marketers as Dynegy Power Marketing, Trans Alta, Eugene Water and Electric, Southern Energy Trading, British Columbia Hydro's PowerEx unit, Public Service Colorado, Enron Power Marketing, Portland General, Avista, Idaho Power Co., PPL Montana, Seattle City Light and Puget Sound Energy.

The ISO's Fluckinger said the agency is spending $50 million-$100 million a day to buy power for sale in turn to the state's electric utilities.

He said the marketers ``have indicated no further willingness to sell megawatts to the ISO and utilities'' because of credit concerns.

Fears Of Bankruptcies

Pacific Gas and Electric Co. (PG&E), the state's largest utility, said it is piling up billions of dollars in uncollected power purchase costs because its retail rates are frozen under a complex 1996 state law to deregulate the power market.

U.S. Senator Diane Feinstein, a Democrat, said the unprecedented emergencies and soaring power prices ``may very well bankrupt'' two of California's major utilities -- PG&E and Southern California Edison.

The two are the utility subsidiaries of San Francisco-based PG&E Corp. and Edison International, headquartered near Los Angeles in Rosemead, Calif.

``We are united in asking that the Federal Energy Regulatory Commission establish an immediate region-wide wholesale price cap to stop the bleeding of electricity from California until stability can be returned to the market,'' Feinstein said.

A spokesman for PG&E said the utility is charging customers 5.4 cents for a kilowatt hour of service when the power actually costs PG&E up to 80 cents. ``That's a situation that can't last forever. All the costs at the ISO get passed on to us,'' he said.

``Two things have got to happen. Retail prices need to go up...and we need a rate stabilization plan to avoid a San Diego situation,'' he said, referring to the doubling and in some cases tripling of electricity bills in San Diego since prices there were ``unfrozen'' to reflect underlying market conditions.

PG&E had by the end of November run up an unforeseen bill for power purchases of $4.6 billion, or roughly 56 percent of the company's capitalized value.

http://dailynews.yahoo.com/h/nm/20001213/ts/utilities_california_dc_7.html

-- Martin Thompson (mthom1927@aol.com), December 14, 2000

Answers

At these rates solar energy does make sense, also guarantees that you'll have power.

-- (perry@ofuzzy1.com), December 14, 2000.