Power crisis moves into San Diego

By Myra P. Saefong & Tom Bemis, CBS.MarketWatch.com Last Update: 7:26 PM ET Jan 24, 2001

SAN DIEGO (CBS.MW) - California's electricity crisis headed south Wednesday as a third investor-owned utility said it's having trouble paying off high-priced wholesale power costs.

Sempra Energy's (SRE: news, msgs) San Diego Gas & Electric unit said it's filing with state regulators for a rate surcharge of 2.3 cents per kilowatt-hour beginning March 1. The move would add $11.50 a month to the typical residential customer electric bill of $72.

"The state government's actions are not keeping pace with the sharp rise in wholesale electricity prices," said Debra L. Reed, president of SDG&E in a statement. "Our customers have been paying only a small fraction of these power costs."

The state's two other investor-owned utilities, Pacific Gas & Electric, a unit of PG&E Corp. (PCG: news, msgs) , and Southern California Edison, a unit of Edison International (EIX: news, msgs) , are within days of bankruptcy.

The companies have run up billions in debt paying for electricity on the wholesale market which they must sell at retail rates capped by state regulators.

The California crisis has drawn increased attention from Washington. The Bush Administration extended an order requiring power generators to continue selling electricity into the state for another two weeks. See related story.

The chairman of the U.S. Senate Energy and Natural Resources Committee, Sen. Frank Murkowski, R-Alaska, set hearings for next week into the crisis. See related story.

Politicians were active in Sacramento as well.

California is rapidly running through $400 million approved last week for emergency power purchases needed to keep the state's lights from going dark.

The state legislature and Calif. Gov. Gray Davis are reviewing the results of an online auction seeking bids to supply the state with electricity for up to ten years.

The hope is that long-term contracts will bring down the cost of electricity. Legislative action may resume Thursday.

Edison International said it won a three-week reprieve in some debt payments to creditors. The company also said it had asked a state judge to speed up a hearing to consider its motion to force an immediate rate hike. See related story.

California managed to avoid blackouts Wednesday and is trying to cut back from its stage three alert status for the rest of the week. See related story.

Some observers say the state is reaping a just reward for its failure to build enough generating capacity. See related story and related energy crisis coverage.

A spokesman for the California Power Exchange said Wednesday the agency had been in the process of liquidating $215 million forward contracts owned by Edison to pay off obligations.

The move was halted after a state court judge in Los Angeles issued a week-long injunction at the request of the state attorney general's office, acting on behalf of Gov. Davis, the spokesman said.

On Thursday a judge in San Francisco will hear a similar case involving $12 million owed by PG&E to the exchange

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-- Martin Thompson (mthom1927@aol.com), January 24, 2001