Features

Cash-strapped utilities ordered to stay in business

The Associated Press
Saturday January 20, 2001

SACRAMENTO — Saying insolvency was no excuse, state regulators slapped California’s two largest utilities with an order Friday barring them from cutting off power to the 25 million people they serve. 

The Public Utilities Commission order lasts at least until a Jan. 29 hearing. But it didn’t erase the possibility of more rolling blackouts ordered by managers of the state power grid. 

Power authorities were cautiously optimistic they could avert more of the random blackouts that have snarled traffic and disrupted lives across the northern half of the state. But they issued no guarantees the lights would stay on this weekend. 

“Things will be tight,” said Jim Detmers, managing director of Independent System Operator, which manages the grid. 

Effects of the escalating crisis spread through the state’s economy, threatening to push up prices for commodities from gasoline to milk and forcing manufacturers to shut down for hours or days at a time for lack of electricity. 

Miller Brewing Co. halted production at its brewery in Irwindale on Friday and California Steel Industries Inc. in Fontana closed its plant and idled most of its 1,000 workers for the day. Textron Aerospace Fasteners in Santa Ana sent 400 employees home for the day with half-pay. 

The state’s main gasoline pipeline is running only part of the day, threatening supplies to airports and service stations and prompting warnings that prices will start to climb. 

Standard & Poors put the state’s bonds on credit watch Friday, reflecting a lack of investor confidence in California’s ability to dig its way out of the crisis. 

In a stopgap rescue effort, Gov. Gray Davis signed a bill Friday that frees $400 million for the state to buy power on the open market and sell it to utilities. The Department of Finance reported spending $7.9 million in taxpayer money buying power for the statewide grid Thursday under a previous authorization. 

Nobody the state plan it would do more than help California squeeze through until the Legislature adopts a more comprehensive rescue. Assemblywoman Sarah Reyes called it a Band-Aid for “a bleeding body.” 

Random blackouts of about two hours swept across Northern California on Wednesday and Thursday – the culmination of a crisis that has left the state’s two biggest utilities on the verge of bankruptcy. 

Southern California has been spared so far, partly because of the layout of the power grid. Los Angeles has a municipal utility with its own power sources, and a few other areas are similarly protected. 

The crisis peaked when soaring natural gas prices and a shortage of hydroelectric power drove up the wholesale price of energy. Pacific Gas & Electric Co. and Southern California Edison Co. – prevented by a flawed deregulation effort from raising prices to cover their costs – are unable to buy power on credit. They estimate their debt at more than $11 billion. 

The power mess also has been complicated by soaring natural gas prices, a shortage of hydroelectricity for sale, power delivery problems and a number of power plants shut down for repairs and maintenance. 

While the rolling blackouts get the headlines, most of the damage to business is coming from agreements big customers have made with the utilities. In exchange for lower rates, some 1,200 companies have agreed to let the power companies shut them down when electricity runs short. 

Throughout the state, businesses have been forced to turn off the switch, with no indication of when the crisis will pass. 

SoCal Edison and PG&E both warned this week that they might cut service beginning Saturday. PG&E also told state officials it would use only the power it produces itself beginning Saturday – not nearly enough power for the 14 million people it serves. 

The PUC responded with the temporary induction, guaranteeing the utilities “will not and may not abandon service to customers,” Chairwoman Loretta Lynch said. She said the panel’s role was to “preserve the public’s safety.” 

In other developments: 

• The Senate Energy Committee considered long-term contract legislation, which would let the state deal with electricity wholesalers to buy power at about one-fifth the current market rate. The power would be resold to consumers, through the utilities. 

• Energy Secretary Bill Richardson, calling California’s power supply “precarious,” issued an order requiring companies to continue shipping natural gas into California. The action was taken to ensure that utilities will not be cut off by natural gas suppliers. 

On the Net: 

ISO: www.caiso.com 

PUC: http://www.cpuc.ca.gov