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Calif. Power Crisis Deepens As Bush Mulls Options

Friday, January 26, 2001

NEW YORK (Reuters) - Californians' hopes for a brief break from their power crisis were dashed on Friday when officials put the state back on high alert for an 11th consecutive day, again raising the possibility of blackouts.

Once again, radio stations played the now-familiar plea for energy conservation as the California Independent System Operator (ISO) struggled to line up enough power supplies to get the state through the day without widespread outages.

"The supply situation remains very tight ... but we don't anticipate blackouts today," said ISO spokeswoman Lorie O'Donley. The ISO manages about 75 percent of the power grid serving California's 34 million residents.

Meanwhile, U.S. energy officials are considering whether President George W. Bush should take up California's power shortage when he travels to Mexico next month, a White House spokesman said on Friday.

Presidential spokesman Ari Fleischer told reporters he would not discuss specifics of Bush's agenda on the scheduled Feb. 16 trip to meet with Mexican President Vicente Fox, but that energy officials were looking into the matter.

Asked whether Bush would discuss the California power question, Fleischer said, "I'm not prepared this far in advance of the trip to Mexico to get into the president's agenda ... but that is an area I know our energy people are looking at."

A top Mexican electricity official, however, said that Mexico was not likely to be able to offer much help.

Alfredo Elias, head of Mexico's Federal Electricity Commission (CFE), said the country does not have either the interconnections or the generating capacity to provide California with much power.

CFE said in a statement that while its priority was its own consumers, it had about 150 MW of excess electricity it could sell to California.

This would be a fraction of what California needs.

While Mexico exports between 50 and 80 MW to California at hours when there is an surplus of power south of the border, the exports hardly dent California's power deficit as one megawatt serves about 1,000 homes.

The state has been struggling since December to keep the lights on, with the needs of its rapidly growing population and robust economy outpacing what its aging electric system can provide.

ISO officials, citing the typical Friday drop in energy use as schools and offices shut for the weekend, had earlier raised hopes that they could relax the emergency on Friday.

That outlook was dimmed by a blast of cold weather and the sudden shutdown of a power plant early Friday for repairs.

"We had to go back to a Stage Three at about 4:30 a.m. (Pacific time Friday) due to a unit in Northern California going off line," O'Donley said.

The maximum Stage Three warning indicates dangerously low electricity reserves and raises the possibility of cutting service on a rotating basis to entire neighborhoods to prevent demand from overwhelming and collapsing the electric system.

Outages Friday at power plants throughout California totaled about 7,500 MW of electricity -- enough real-time power to supply 7.5 million homes or small businesses at any given instant.

President Bush, who has said the problem is California's to solve, also signaled his willingness to ease air pollution regulations on the state's power plants to help them produce more power.

"If he (California Gov. Gray Davis) thinks that he needs federal waivers on clean air standards to solve his problem, we would be favorably disposed to consider them," White House economic adviser Lawrence Lindsey said.

"We don't want to stand in their way of solving problems as they see best."

Lindsey said the Bush administration had not been asked for the Environmental Protection Agency to waive the rules, although administration officials were in daily contact with California officials. Bush previously had suggested the rules may serve to limit the operating capacity of California's power plants.

Cold weather, which dusted mountaintops around the San Francisco Bay Area overnight and dumped heavy snow in the Sierra Nevada mountains, was seen lasting through the weekend, raising heating demand and carving into already scant power supplies.

"We've seen an especially sharp rise in heating demand in the morning hours," said O'Donley.

She said the outlook for the weekend was "pretty much the same," but added that about 1,100 MW of generation was expected to come back on line by Monday, likely keeping blackouts at bay but giving no cause to relax the call for conservation.

Californians, after having their lights doused by rolling blackouts twice last week, seem to be getting the message that they are in the midst of the state's worst-ever energy crisis.

ISO officials said power use has dropped on average about 1,000 MW during the day thanks to efforts by the public to turn down thermostats, switch off unneeded lighting, and make sure they are not using appliances during the peak morning and evening demand hours.

The Democratic governor has not indicated that he will need a relaxation of standards and a new plan was introduced Thursday in the California legislature with his backing that could provide a long-term solution to the crisis sparked by the state's lopsided experiment with deregulation -- which lifted limits on the prices electricity producers charge while at the same refusing to let utilities pass their increased costs on to consumers.

Government sources told Reuters that the emergency legislation being pushed by Democratic Assembly Speaker Robert Hertzberg envisioned a plan to issue up to $10 billion in bonds, backed by electricity revenues and secured by utility company assets.

The plan would allow a state agency to buy power for both hard-pressed investor-owned utilities and municipal ones which have so far steered clear of the worst of the crisis.

Hertzberg said the governor supported the plan, which is the most detailed proposal so far in dealing with the energy crisis that prompted two days of rolling blackouts last week, leaving hundreds of thousands of people without power and threatening the state's economy, the world's sixth biggest.

"The governor has spent countless hours with us," Hertzberg said. "He has told me he is in conceptual agreement with this bill."

A spokesman for Davis said the plan was not a bailout, because California was getting something in return for helping the utilities stave off bankruptcy. He added that Davis supports parts of the plan, details of which are still under discussion.

"We are getting something in return," said Davis spokesman Steve Maviglio. "If this goes forward, ratepayers would have a stake in the utilities."

http://news.lycos.com/headlines/TopNews/article.asp?docid=RTNEWS-UTILITIES-CALIFORNIA-DC&date=20010126

-- Martin Thompson (mthom1927@aol.com), January 26, 2001