California extended its Stage 3 alert to Monday

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01/21/01- Updated 09:41 AM ET

Lawmakers scramble for power solution SACRAMENTO (AP) — California extended its Stage 3 alert on Sunday to midnight Monday as lawmakers scrambled to find an affordable solution to the state's power crisis.

The keeper of the state power grid had looked forward to a break from high demand over the weekend. But the Independent System Operator found less hydroelectric power from the Pacific Northwest than expected, forcing it to impose its first-ever Saturday Stage 3 alert as reserves approached 1.50%.

Despite the tight supplies, the ISO expected to locate enough electricity to avoid rolling outages, spokeswoman Lorie O'Donley said.

The ISO shut off power to hundreds of thousands of homes and businesses this week for the first time in the monthslong electricity crisis.

The outages affected only the northern half of the state. Southern California, with most of the state's population, was spared because of the layout of the state's power grid and because Los Angeles uses its own power sources to serve its 4 million residents.

In a stopgap effort, Gov. Gray Davis signed emergency legislation Friday allocating $400 million in state funds to buy power and provide it to cash-strapped utilities. At current wholesale prices, that money was expected to last only a week or two.

Lawmakers and Davis administration officials were working through the weekend on a long-term plan to rescue Pacific Gas and Electric Co. and Southern California Edison, both on the brink of bankruptcy.

Government officials were not available for comment Saturday, but PG&E spokesman John Nelson said time was running out.

''It is a matter of days, and at most weeks, before utilities run out of cash altogether,'' Nelson said.

Under discussion was a proposal that would put the state in the electricity business for up to five years, buying power at low rates and selling it directly to consumers.

The crisis, months in the making, peaked when soaring natural gas prices and a shortage of hydroelectric power drove up the wholesale price of energy. PG&E and SoCal Edison couldn't increase customers' bills to cover those rising costs because deregulation imposed a price freeze.

The effects of the power crisis began to ripple through the economy this week, as power problems shut down the state's main gasoline pipeline and forced farmers to dump milk because dairy plants were running for fewer hours.

Late Friday, the Public Utilities Commission released the state's two major gasoline pipelines, operated by Kinder Morgan Energy Partners and GATX Terminals Corp., from their interruptible service obligations for at least the next seven days, said Claudia Chandler, a spokeswoman for the state Energy Commission, which pushed for the exemption.

A few independent stations used up their gas supply after the pipeline stopped running during the outages imposed under the interruptible power contracts.

http://www.usatoday.com/news/2001-01-21-calif.htm

-- Martin Thompson (mthom1927@aol.com), January 21, 2001

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Sunday January 21 4:50 PM ET California Seen Escaping Further Power Blackouts

By Nigel Hunt

LOS ANGELES (Reuters) - California looks set to squeak through the next couple of days without further rolling blackouts, with some of the state's aged fleet of power plants poised to return to service, a spokeswoman for the state's electric grid manager said on Sunday.

``It is tight but we are not forecasting any rotating outage for the next couple of days,'' said Stephanie McCorkle of the California Independent System Operator (news - web sites) (ISO), which manages about 75 percent of the state's power grid.

Public frustration with the crisis, which twice last week saw blackouts imposed in northern California, appeared to be growing.

The nation's richest and most populous state was hit with controlled, or ``rolling,'' power blackouts last week due to a chronic shortage of electricity across western states.

To meet demand, California utilities have been forced to pay skyrocketing prices for wholesale electricity on the spot market but are not permitted to pass through their full costs to consumers under the state's 1996 deregulation law.

The burden has taken San Francisco-based Pacific Gas & Electric, a unit of PG&E Corp., and Edison International unit Southern California Edison (news - web sites), which is based just outside Los Angeles, to the brink of bankruptcy.

Democratic Gov. Gray Davis (news - web sites), although still generally popular, has been targeted by critics who believe he has not acted decisively to tackle the state's chronic power shortage and the near bankruptcy of its two largest utilities.

``He is looking for a solution that will work, not a solution for the moment. He wants legislation that is going to fix this once and for all,'' Davis' spokesman Steve Maviglio told Reuters on Sunday.

The dwindling funds of the state's two main utilities have resulted in their debt ratings being cut to junk status and made power sellers' reluctant to do business with them, exacerbating the shortage of electricity.

Last week Davis signed legislation which allocated $400 million for the California Department of Water Resources to buy power on behalf of the utilities and their 24 million customers who account for 70 percent of the state's population.

In a poll published late last week, the Public Policy Institute of California found that while Davis received a 63 percent approval rating as governor, a clear majority of 62 percent disapproved of his efforts to solve the power crisis. The findings mirrored similar results from a Los Angeles Times poll published earlier this month.

Maviglio said the governor was continuing to hold talks over the weekend with state lawmakers and his staff. They are currently trying to design an auction at which the state would receive offers from power producers to buy electricity under long-term contracts.

Electricity can be bought much more cheaply through long-term deals as many expect prices to fall significantly when the current chronic shortage starts to ease after the summer of 2002 as planned power plants come on line.

California's power problems are also rooted in the absence of any significant new plant construction during the last decade, partly due to uncertainly connected with the state's much criticized deregulation legislation.

Maviglio said Davis hoped to finalize the auction scheme by the middle of the week.

He noted that Davis has also talked of appointing a ``power plant czar'' to speed up the construction of new plants. Many of the state's fleet are currently more than 30 years old and have been breaking down with alarming frequency recently.

ISO spokeswoman McCorkle said by Monday around 9,000 megawatts or one-fifth of all available power would be off line, well below the recent peak of about 15,000 MW and also significantly below the 10,700 MW which was out of action on Friday. One megawatt is enough to supply around 1,000 people.

The ISO extended a so-called stage three emergency through midnight on Monday, its highest level of alert and one that is called when reserves drop to around 1.5 percent of demand, considered a critically low amount.

McCorkle noted that the ISO temporarily lifted its stage three alert on Saturday morning but was quickly forced to reinstate it.

``We had some rough moments yesterday morning,'' she said, noting that lifting of the stage three cut off the flow of electricity from some key suppliers in the Pacific Northwest.

``The Northwest doesn't have that many megawatts, so California does have to be on the brink of blackouts to get that power,'' she said.

Wholesale prices in California started to soar in late spring with supplies struggling to keep pace with surging demand linked to a buoyant economy and growing population.

-- Rachel Gibson (rgibson@hotmail.com), January 21, 2001.


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