Credit Crisis Seen Adding to Calif. Blackout Threatgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Fair use for educational/research purposes only
Credit Crisis Seen Adding to Calif. Blackout Threat January 12, 2001 2:51 pm EST
By Nigel Hunt LOS ANGELES (Reuters) - A day after the lights nearly went out in two million homes in California, experts say it has become clear that a lack of money -- and not just power shortages -- contributed to the official decision to order the state's first-ever series of rolling blackouts.
The blackouts were narrowly averted when a more solvent state agency -- the California Department of Water Resources (CDWR) -- stepped in on Thursday to buy power on behalf of the embattled California Independent System Operator (ISO). That agency's creditworthiness has nosedived because its two leading utility customers are tottering on the brink of bankruptcy.
The ISO, the state agency charged with buying power, confirmed that the CDWR supplied it with around 1,200 megawatts on Thursday, enough to provide electricity for about 1.2 million residents.
Market sources said much of the power came from BC Hydro, a Canadian utility owned by the province of British Columbia, which cut off spot sales to California in mid-December citing credit issues. BC Hydro recently signed a credit agreement with the CDWR, market sources said.
"I believe some megawatts became available because suppliers were more willing to make sales to the state which can positively make payments rather than some entity that has a cloud of uncertainty over how it can pay," said Kellan Fluckiger, chief operating officer of the California ISO.
The state's desperate power plight on Thursday came as storms knocked out power lines to devastate output from California's plants. About 15,000 megawatts, or one-third of all available power in the state, were off line.
The situation appeared to have improved on Friday with a major nuclear plant in central California, Diablo Canyon, upping its output to almost full power from about 20 percent during the storms on Thursday.
"We do not believe we have the threat of a stage three today," Fluckiger told a news conference on Friday. A stage three emergency, the highest level of alert issued by the ISO, raises the threat of blackouts because reserves were expected to fall below 1.5 percent of demand.
BILLIONS IN DEBT
California's two biggest utilities, San Francisco-based Pacific Gas and Electric and Southern California Edison, which is based in the Los Angeles' suburb of Rosemead, have run up billions of dollars of debt this year because they have not been allowed to pass on skyrocketing wholesale power costs due to a rate freeze imposed under the state's much-criticized power deregulation program.
The shortfall on power purchases at the end of December stood at $6.6 billion for Pacific Gas & Electric, a unit of PG&E Corp. and around $4.9 billion for Southern California Edison, which is a unit of Edison International -- burdens that have taken both companies to the brink of bankruptcy.
The ISO said it was saved from blackouts by a large increase in imports from the Northwest, which would have included Canadian power.
Power brought in along a key transmission line, the California-Oregon Intertie, rose to 4,200 MW during peak hours on Friday, near its current capacity of 4,300 MW and well above the recent average of 1,500 MW. The additional 2,700 MW was more than enough to keep the lights on in the state.
Portland, Ore.-based federal agency the Bonneville Power Administration came to California's aid, providing about 1,000 MW. BPA runs the massive federal hydropower dams along the Columbia River.
There was some good news for the embattled utilities on Friday with credit rating agency Fitch revising its outlook from negative to evolving. The change means ratings could be raised or lowered due to near term events.
"The signs of progress to date do not preclude the possibility of an adverse turn of events that could lead to default by one or both of the utilities or their parent companies, but Fitch believes that the possibility of a constructive solution has improved somewhat over the past week," the ratings agency said in a statement on Friday.
Fitch recently downgraded the utilities' ratings to junk status. The other major rating agencies, Standard and Poor's and Moody's Investor Service, have kept the utilities on the lowest investment grade.
Federal, state and industry negotiators were meeting for a fourth consecutive day in Washington on Friday to fashion a plan aimed at giving California utilities as much as 90 days to pay off their mounting debts for power and stave off bankruptcy. The talks were expected to continue this weekend.
-- Martin Thompson (firstname.lastname@example.org), January 12, 2001
I wonder what signs of progress Fitch sees.
I don't see any at all.
-- Chance (email@example.com), January 12, 2001.