Experts say crisis likely to stay around

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Experts Say Crisis Likely to Stay Around Little government consensus on solution

David Lazarus, Chronicle Staff Writer Thursday, January 25, 2001

Washington believes California can solve in just two weeks an energy crisis that has caused widespread blackouts and driven utilities to the brink of bankruptcy. Washington, analysts say, could not be more wrong.

"There will be more blackouts," said Michelle Pantoya, a former official at the California Energ Commission who now teaches at Texas Tech University. "It's very unlikely that anyone will be able to resolve this crisis in just two weeks."

Among the various hurdles to be overcome: an acute lack of generating capacity to meet soaring demand, runaway wholesale prices and virtually no consensus among legislators about how best to proceed.

U.S. Energy Secretary Spencer Abraham told Gov. Gray Davis straight out Tuesday that he would not renew an emergency order requiring electricity and natural gas suppliers to sell to California. The order expires at 3 a.m. on Feb. 7.

Abraham is not upholding free-market principles, sources said. Rather, he is bowing to political pressure from other Western states, which have bitterly complained about being forced to keep California's energy flowing.

But analysts said a lasting solution to California's power woes would take months to achieve.

Pantoya noted that even though the governor and other politicians had made the power shortage their No. 1 priority, the bureaucratic wheels in Sacramento still would spin at their own pace.

"The California bureaucracy is just too immense," she said. "One of the biggest obstacles is getting a large group of people to agree on one thing."

The governor remains optimistic. His spokesman, Steve Maviglio, said Davis was unfazed by Abraham's two-week deadline for federal assistance.

"We are hopeful the electricity challenge will be met within the next two weeks," Maviglio said without elaborating.

But electricity is only half the problem. Abraham's emergency order also requires natural gas suppliers to meet California's needs -- and Pacific Gas and Electric Co., for one, says it could run out of gas to heat customers' homes within weeks.

Maviglio was less upbeat when asked what the governor thought about the gas part of the equation. "That continues to be a challenge," he said. A big challenge. Natural gas is needed for both residential and commercial furnaces, and, no less importantly, to run the power plants that produce electricity.

Staci Homrig, a PG&E spokeswoman, said the utility's 4.5 million customers would keep their homes and businesses heated for the duration of Abraham's emergency order.

"Then we expect to go back to the same position we were in before -- suppliers not wanting to sell us gas," she said.

Many of PG&E's gas suppliers have demanded cash up front because of the utility's precarious financial status. PG&E is saddled with nearly $7 billion in debt and is unable to secure new loans from financial institutions.

As things stand, Homrig said, the utility only has 60 percent of its gas needs covered for February.

To make up for the shortfall, PG&E will burn through its existing supplies. At the current rate of usage, Homrig said, those supplies will be depleted by the end of next month.

After that, who knows? "We do not intend to write legislation for the state," Abraham said when he extended the emergency order on Tuesday, essentially telling California lawmakers that the onus is on them to somehow get out of this mess.

Curt Hebert, chairman of the Federal Energ Regulatory Commission, sounded more like a stern parent when he told reporters yesterday that California should not expect Washington to come riding to the rescue.

"It's in California's best interest for us to allow them to figure it out," he said.

Such tough-love tactics may play well in the newly coronated Bush administration, but they only make things harder for Davis and other state political leaders.

"It's absolutely the federal government's responsibility to restore California's wholesale market to just and reasonable rates," said Susannah Churchill, who oversees energy policy for the California Public Interest Research Group in Sacramento.

One idea lawmakers are considering is for the utilities to hand over nearly $5 billion worth of dams in return for state assistance in purchasing power.

But sources said that proposal had all but died this week when PG&E and Southern California Edison signaled that they would rather file for bankruptcy than give up such valuable assets.

Instead, the leading proposal is now for the state to issue bonds that would raise funds for the Department of Water Resources to purchase electricity on behalf of the utilities.

The governor was slated to be briefed on the intricacies of this plan yesterday afternoon.

However, many details have yet to be worked out. Would taxpayers end up footing the bill when payments are due to bondholders? If electricity is more costly than expected, as it almost certainly will be, what happens if the utilities are unable to pay back the state?

Many analysts believe that one component of any long-term solution to California's power woes will be an eventual rate increase, leaving consumers, as usual, holding the bag for the past mistakes of utilities and legislators.

"The greatest likelihood is that consumers, and taxpayers, will end up taking the hit," said Harry Snyder, senior advocate at Consumers Union in San Francisco. "There will be no good that comes out of this."

E-mail David Lazarus at dlazarus@sfchronicle.com. ·

-- Swissrose (cellier@azstarnet.com), January 25, 2001


Moderation questions? read the FAQ