White House Calls Summit On California Power Crisis

By Rene Sanchez Washington Post Staff Writer Friday, January 5, 2001; Page E01

LOS ANGELES, Jan. 4 -- The Clinton administration is summoning California Gov. Gray Davis (D) and leaders of the state's beleaguered utility companies to the White House next week in the hope of solving the state's escalating energy crisis, senior administration officials said today.

White House intervention into the morass of soaring electrical-power costs and scarce supplies is the clearest sign yet that California's predicament is becoming a national issue.

California's economy is larger than that of all but five countries. But with its utility companies threatening bankruptcy, and many of its businesses and consumers getting buffeted by rising bills, it is on uncertain footing for the first time in years.

As the crisis has grown, so has a rhetorical war among politicians, consumer advocates and power-company executives over who is to blame and how problems stemming from California's shift to electricity deregulation can be solved, or reduced. Administration officials said they hope that by bringing all sides to the White House they can establish a new tone for negotiation and forge a compromise.

"We feel that this is a serious enough situation that every party has to be willing to compromise and go the extra mile to find a way out," a senior administration official said. "We believe every effort should be made to bring the parties together in search of at least a temporary solution."

Details of next week's White House meeting were still being worked out late today, but it may occur on Tuesday. Steve Maviglio, a spokesman for Davis, said the governor welcomed the administration's overture and would use it to urge federal energy regulators to cap the wholesale price of power. "That's the big kahuna for us," Maviglio said.

As expected, the California Public Utilities Commission today granted the state's two largest utilities emergency rate increases. Under the plan, residential rates in California will rise by 9 percent while commercial and industrial rates will rise between 7 percent and 15 percent.

In a prepared statement, Davis said he reluctantly supported the increases. "Four years ago, Californians were promised that deregulation would reduce the cost of electricity," the governor said. "If I had my way, there would be no rate increase to consumers. But given the colossal failure of California's deregulation scheme, the PUC's decision was unfortunately necessary."

But the rate increases were still far less than the 30 percent Southern California Edison Co. sought and the 26 percent Pacific Gas and Electric Co. wanted, and they will last for only 90 days. Both utilities contend that they have lost more than $9 billion since last fall because they have been prohibited from passing on soaring wholesale prices to customers and are now on the brink of bankruptcy.

Standard and Poor's, the major credit rating agency, agreed that the increases will make only a small dent in the utilities' cash-flow problems. It sharply downgraded the utilities' debt, which will make it even more difficult for the utilities to borrow money to buy electricity.

California, which has not added a major power plant in a decade, ran short of electricity during last summer's unusually hot weather, when demand for air conditioning soared. Now blackouts are threatened by cold weather, and out-of-state generators have been reluctant to deliver power because they're not sure they will be paid. Under deregulation, utilities no longer control the power produced by their plants; they must sell it at wholesale cost to a state-chartered power exchange.

Clinton administration officials said they do not expect to emerge from next week's summit with a permanent solution. Rather, they are hoping for at least a short-term compromise. Energy Secretary Bill Richardson and Treasury Secretary Lawrence H. Summers will attend next week's meeting, officials said.

For Davis, the trip to Washington will be his second in the past few weeks to focus on the state's energy problems. In late December, he met separately with President Clinton and Federal Reserve Chairman Alan Greenspan.

So far, California has not had to impose rolling blackouts to conserve power, but in recent months it come close to resorting to that tactic.

© 2001 The Washington Post Company

http://www.washingtonpost.com/ac2/wp-dyn/A21488-2001Jan4?language=printer

-- Martin Thompson (mthom1927@aol.com), January 05, 2001