12/13 18:01 Energy Secretary to Force Power Sales to California (Update1) By Daniel Taub

Folsom, California, Dec. 13 (Bloomberg) -- Energy Secretary Bill Richardson said he will use emergency powers to force generators to send more electricity to California, which is facing rolling blackouts today.

Some power producers in the Northwest refused to send electricity to the nation's most-populous state because of concerns that utilities won't be able to pay their bills. PG&E Corp., owner of California biggest utility, had said soaring prices could leave it unable to finance power purchases because regulators have refused to let it pass the costs on to customers.

Richardson said the Energy Department will set the rates for how much suppliers can charge and will ``ensure generators receive a fair return.''

``Our objective is to keep the lights on in California to deal with this emergency situation,'' Richardson said outside the office of Senator Dianne Feinstein, a California Democrat.

The energy secretary met today with Feinstein, California Governor Gray Davis and Federal Energy Regulatory Commission Chairman James Hoecker to discuss solutions to the state's electricity problems.

Seeking Power

Richardson also said he ordered the Bonneville Power Administration and the Western Area Power Administration ``to get as much power into California immediately today.''

Officials from FERC and the Energy Department made calls on California's behalf today in an attempt to bring power into the state, said Lorie O'Donley, a spokeswoman for the California Independent System Operator, which operates 75 percent of the state's power grid.

``That seems to be working,'' she said, adding that it's too soon to tell whether blackouts can be avoided. ``We have seen stuff coming in.''

Power providers in Washington and Oregon are concerned that the system operator won't be able to pay for electricity sent to California, O'Donley said. Since the operator's bills are paid by the state's three investor-owned utilities, ``it really gets back to the credit issue concerning the utilities,'' she said.

PG&E Corp.'s Pacific Gas and Electric Co. and Edison International's Southern California Edison have racked up more than $7.2 billion in power-buying losses. Fitch Investors Services Inc. this week lowered its ratings on the two utilities' debt and preferred stock.

`Drastic Measures'

Edison, the second biggest utility, might ``soon be compelled to take drastic measures . . . that could include rationing electricity,'' Chief Executive Officer John Bryson said in a statement distributed by PR Newswire.

``The new market structure is broken and must be discarded,'' Bryson said. ``We need to reform and, where necessary, re-regulate California's electric system.''

Under deregulation, Edison was forced to sell its generating plants to companies now selling power ``for prices that are indefensible,'' Bryson said.

Edison sold power at $31 a megawatt hour in previous December, and ``yesterday's price was over $1,000 a megawatt hour -- far more than can be defended on the basis of increased costs of production,'' Bryson said.

Electricity prices in the California-Oregon board region fell to $425.50 a megawatt from $625 a megawatt yesterday and $3,000 a megawatt on Friday, according to the Bloomberg Energy Service. The average price so far this month has risen more than 24-fold from the same period a year ago.

San Francisco-based PG&E shares fell 44 cents to $21.19. Rosemead, California-based Edison's shares were unchanged at $18.56. The shares of Sempra Energy, owner of California's No. 3 utility, San Diego Gas & Electric, fell 19 cents to $22.06.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&refer=topsum&T=markets_bfgcgi_content99.ht&s2=blk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AOjf.tRWzRW5lcmd5

-- Cave Man (caves@are.us), December 13, 2000

Answers

This is great. We're enduring the consequences of some misguided, egalitarian breakup of perfectly good monopolies and now the Feds are going to take over and "ensure generators receive a fair return".

Stay tuned folks, your healthcare is next.

-- Carlos (riffraff@cybertime.net), December 13, 2000.

http://dailynews.yahoo.com/h/ap/20001213/us/west_coast_power_20.html

Wednesday December 13 10:18 PM ET

Richardson Averts Blackouts Threat

By STEVE LAWRENCE, Associated Press Writer

SACRAMENTO, Calif. (AP) - Energy Secretary Bill Richardson ordered Northwest power suppliers to sell electricity to power-strapped California utilities Wednesday, a move that averted the immediate threat of rolling blackouts.

State regulators had warned earlier that rolling blackouts were imminent due to power shortages within the state and an inability to buy more electricity from the Northwest.

The warning came from the Independent System Operator, keeper of California's power grid. It said that electricity supplies were so perilously low that it might declare a Stage 3 power emergency for only the second time ever. At Stage 3, the grid can impose blackouts.

Richardson said at a Washington, D.C., news conference he was using emergency powers to force wholesalers to sell power to California at a price he deemed fair. He said he would also request that two large Pacific Northwest power generating associations send more power to California.

``Our objective is to keep the lights on in California through this emergency situation,'' he said. ``We're dealing with a potentially very serious situation here.''

California has been caught in a power crunch over the past several days, in part because of cold weather in the Northwest - where California buys much of its power - and the shutdown of some generating plants for maintenance.

ISO officials said the threat of blackouts appeared to be averted after the Bonneville Power Administration diverted 1,500 megawatts to California and some suppliers that balked at selling power to utilities in the state relented.

``It is not likely we will have any outages'' for the rest of the week, said Kellan Fluckiger, the ISO's chief operating officer. He said Richardson's actions were key in avoiding blackouts Wednesday, but the state was not ``out of the woods'' in the long run.

The ISO was on the phone literally ``hunting for megawatts,'' spokeswoman Stephanie McCorkle said.

California's two largest utilities, Pacific Gas and Electric and Southern California Edison, are near bankruptcy due to skyrocketing wholesale power costs, Gov. Gray Davis and Sen. Dianne Feinstein, D- Calif., said at a Washington, D.C., news conference with Richardson.

Davis and Feinstein asked federal regulators to set a regional price cap on wholesale electricity to prevent the high prices that have plagued California. Washington state Gov. Locke urged similar action in a letter to President Clinton (news - web sites), Richardson and Federal Energy Regulatory Commission chairman James Hoecker.

On Friday, the Federal Energy Regulatory Commission lifted price caps in California. Record wholesale power prices followed, and PG&E warned it was in financial danger.

The problem became especially acute when about a dozen suppliers began demanding cash before selling power to California, Kellan Fluckiger, the ISO's chief operating officer, said Wednesday.

Fluckiger warned earlier that officials might have to interrupt power to as many as 4 million customers Wednesday afternoon and early evening.

``The credit limits of utilities and what markets are willing to sell us have been reached and surpassed in many cases,'' Fluckiger said. ``There are questions about utility solvency. That has come to a head today.''

An unprecedented Stage 3 emergency was issued last Thursday, meaning reserves had fallen below 1.5 percent. But the state fended off rolling outages by turning off two power-sucking water pumps.

A Stage 2 alert was declared Wednesday afternoon, meaning power reserves fell below 5 percent and large commercial customers could be asked to reduce power consumption. A Stage 1 alert was declared Wednesday morning, meaning power reserves were below 7 percent and all power users are asked to conserve.

Stage 1 and Stage 2 emergencies have become routine this month, but last Thursday's Stage 3 was the only time the threat of blackouts loomed.

Contributing to the problem is a shortage of water to power hydroelectric generators in the Northwest and California, Fluckiger said.

``We have reservoirs so low that we have people standing by them watching the situation to make sure it does not go below safe limits,'' he said.

The power crunch over the past few months has been blamed in part on electricity deregulation. California approved a phased-in deregulation of the electricity market in 1996 to try to lower prices for consumers through competition, but so far it has led to higher energy prices.

At the same time, wholesale power costs have been soaring, in large part because of skyrocketing prices for natural gas. Wall Street is worried about utilities' financial health, and on Tuesday, a consumer group urged the state to seize and run the strapped $20 billion electricity system.

The head of a major utility warned that his company could be forced to ration electricity unless state officials develop ``immediate and longer-term fixes to a broken system.''

``We need to reform and, where necessary, re-regulate California's electric system,'' possibly letting utilities generate their own power as they did before deregulation, said John Bryson, president and chief executive officer of Edison International.

-- ($@$.$), December 14, 2000.