U.S. Cheney Calls Energy Woes State's Mess

Vice president says U.S. won't extend sale order

Peter Hartlaub, David R. Baker, Chronicle Staff Writers Monday, January 29, 2001

Fair use for educational and research purposes only!

On the eve of a White House strategy session on California's energy crisis, Vice President Dick Cheney warned yesterday that the state will have to fix the power mess without much federal help.

He blamed the crisis on flaws in the state's deregulation scheme and said the Bush administration will not issue another emergency order forcing suppliers to sell power to California when the current order expires Feb. 7.

"We're prepared to do those things that we can to help, but the basic problem in California was caused by Californians," Cheney said on "Fox News Sunday."

His comments, made as the state endured its 13th straight day on alert for possible rolling blackouts, were the strongest signal yet that the administration will not intervene even as the crisis commands more attention in Washington.

President Bush will meet with Cabinet officials and agency heads today to discuss California's power problems. A meeting between administration officials and several governors of Western states, where anger is on the rise over the crisis' effects, is planned for Thursday.

For their part, California officials said they are moving forward as fast as possible on their own efforts to deal with the power crunch, mindful of the looming Feb. 7 deadline. Assembly Speaker Robert Hertzberg, D-Sherman Oaks, for example, has introduced a bill that would allow the state to issue bonds to pay for electricity under long-term contracts -- with no reliance on a federal bailout.

"The governor and the bipartisan leadership are making substantial progress and are aware of the time constraints," Steve Maviglio, spokesman for Gov. Gray Davis, said yesterday.

But some of the federal help state officials wanted, including a cap on wholesale power prices, seemed unlikely at best.

"They should expect no more help from the White House," Bush's top economic adviser, Larry Lindsey, said yesterday on CBS' "Face the Nation."

"It's not that we don't want to give them the help. If we could send thunderbolts into the electric grid to run electricity, we would do it. We can't."

Despite another day on Stage 3 alert, California managed to avert blackouts on Super Bow Sunday, according to a spokeswoman for the organization that runs the state's power grid. The state faces another Stage 3 alert today.

Blackouts lasting about two hours hit almost 2 million California homes and businesses Jan. 17 and 18.

The Bush administration is aware of the risk of appearing callous to California voters. One GOP source said Bush wants to avoid a repeat of Gerald Ford's costly decision not to intervene in New York's bankruptcy crisis in the 1970s, a choice that battered Ford's public image.

And yet, Bush has avoided calls for such direct action as instituting price caps. Instead, administration officials have suggested easing environmental restrictions as a way to build more generating plants.

Cheney yesterday blamed much of the crisis on elements of California's deregulation plan that he said made construction of new power plants difficult and slow. Maviglio responded that the state now has five power plants under construction and 19 in the pipeline.

In approaching the problem, Bush will hear from California's neighbors. Officials in Oregon and Washington are upset by the order that forces suppliers to continue selling scarce electricity and natural gas to California.

They complain that the order drains the reservoirs that fuel hydroelectric plants, endangers salmon runs, raises consumer rates and threatens electricity shortages in the summer. California has also relied on power coming from Arizona.

"The cost of putting California power in now is less power this summer," Lindsey said on CNN's "Late Edition." "It is closing down aluminum smelters in Oregon, it's closing down agriculture in Arizona."

Energy Secretary Spencer Abraham and newly appointed Federal Energy Regulatory Commission head Curt L. Hebert Jr. will meet this week with western governors in Portland, Ore., to discuss the problem.

California's power crisis can be traced back to the state's 1996 deregulation law that forced investor-owned utilities to sell their power plants and buy wholesale power, but capped the rates they can charge customers.

As a result, Southern California Edison and Pacific Gas & Electric Co. say they've lost more than $10 billion due to soaring wholesale prices and are near financial ruin.

Electricity and natural gas suppliers, scared off by the two utilities' poor credit ratings, are refusing to sell to them. That, combined with a tight supply and high demand has pushed California into an hour-by-hour search for electricity and has resulted in day after day of severe power shortages, including two days of blackouts.

Chronicle news services contributed to this report. / E-mail Peter Hartlaub at phartlaub@sfchronicle.com and David R. Baker at dbaker@sfchronicle.com.

-- Swissrose (cellier@azstarnet.com), January 30, 2001