Published Saturday, Jan. 20, 2001, in the San Jose Mercury News

Financial troubles loom behind threat of blackouts HOSPITALS COULD CLOSE; GASOLINE ALREADY SCARCER BY TRACEY KAPLAN Mercury News

California escaped a third day of rolling blackouts Friday, but was beginning to feel the mounting economic impact of the energy crisis, which threatens virtually every sector of the world's sixth-largest economy.

A health-care association warned that up to a third of the state's hospitals could be forced to close unless their energy costs go down. Gasoline stations predicted motorists would pay more at the pumps because the state's major pipeline had intermittent power until midday Friday. And the state spent at least $23 million of taxpayer money Thursday and Friday to keep the lights on -- with no guarantee the funds will ever be paid back.

No outages are expected this weekend, a reprieve officials attributed to extensive conservation efforts, lower weekend demand, repaired power plants coming online and the state's electricity buys.

The state bought about three times as much electricity Friday as it did the day before under the authority granted this week by lawmakers concerned about the deteriorating financial condition of the two major utilities.

Energy consumption Friday dropped during the morning peak by 600 megawatt hours -- a clear sign that residents and businesses were taking conservation to heart. That's enough power for 600,000 homes.

``There has been a very significant impact because of conservation,'' said Jim Detmers, managing director of operations for the Independent System Operator, keeper of the state's power grid.

But Detmers warned that the $850 million in state funds available so far would buy only enough power to last two weeks to a month, depending on factors ranging from weather conditions to continuing conservation efforts.

Natural gas supplies also remain precarious. U.S. Energy Secretary Bill Richardson on Friday ordered suppliers to continue shipping natural gas to California, despite their concerns over selling to the financially strapped utilities. But the order extends only through Tuesday.

Pacific Gas & Electric Co., one of the endangered utilities, expressed concern that the order ``will have only limited practical effect in relieving the shortage of gas supplies'' and requested that it be extended at least through February.

State regulators said the outages this week would have lasted longer than a few hours if it weren't for some 1,200 businesses that signed contracts agreeing to give up power when energy is scarce in exchange for lower rates in normal times. The firms are known as ``interruptibles.''

``Without the interruptibles and their help, we would have had to go into rotating outages for 18 hours for each of the last two days,'' Detmers said Friday.

But the arrangement, a bargain in better days, is now hurting some sectors of the state economy.

Many of California's 450 acute-care hospitals, which have signed such contracts, faced cutoffs of 12 to 18 hours Wednesday and Thursday, and seven hours Friday, said Roger Richter, an executive with the California Health Care Association, a hospital lobbying group.

Backup generators have only enough juice to power the lights and other equipment in 30 to 40 percent of a hospital, Richter said. So most hospitals paid rates up to 100 times higher than normal for uninterrupted power from the utilities, he said.

St. Bernardine Medical Center in San Bernardino paid $500,000 for electricity this week, he said.

Hospitals generally can't pass the costs on because they are locked into fixed contracts with HMOs. Worried about the gloomy energy situation, many tried to opt out of their contracts in November, when their annual contracts normally expire. But the Public Utilities Commission extended such contracts until March 31 because so many companies were opting out.

About 34 percent of the state's hospitals do not make a profit.

``High power costs could be the straw that breaks the camel's back,'' Richter said. ``At this rate some hospitals will be forced out of business.''

The association has asked the governor to release hospitals from the contracts.

Gas station owners fear their wholesale prices could go up if the state's main pipeline stops running again because of the energy crunch.

The Kinder Morgan Energy pipeline, a 2,000-mile network, has been an ``interruptible'' for 11 years, pipeline vice president Mary Morgan said. The pipeline was down for 42 hours this week, sometimes for as long as 18 hours. But the longest it was ever cut off before this week was six hours at a time, she said.

Morgan said no distributors ran out of gasoline this week, so there should be no immediate price increase. But more power curtailments are expected in the near future, she said.

Doug Henderson, executive director of the Western States Petroleum Association, said the state's refineries, pipelines and distributors of gasoline, diesel and jet fuel cannot withstand repeated interruptions.

San Francisco International Airport has its lowest reserve of jet fuel in more than four decades.

``I don't know if we've ever been this low, I mean ever,'' said Ron Wilson, airport spokesman, ``They turned the pipeline back on but it's not flowing fast enough to replenish our tanks.''

Jets at San Francisco Airport consume approximately 3 million gallons of fuel per day.

San Jose International Airport was not affected because it doesn't get fuel from Kinder Morgan.

``This situation is bad and getting worse,'' Henderson said. ``What began as an electricity crisis is now a natural gas crisis and soon could be a gasoline crisis.''

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-- Martin Thompson (mthom1927@aol.com), January 20, 2001

Answers

Martin- Sorry about the double post! If I knew how to delete it, I would. If you know how to, please feel free to do so. Swissrose.

-- Swissrose (cellier@azstarnet.com), January 20, 2001.