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AP Wires, Thurs 3/22: "Report: Power wholesalers overcharged California $5.= 5=20 billion" Dow Jones Newswires, Thurs 3/22: "Reliant To Appeal Fed Judge Ruling To Sel= l=20 Pwr To Calif" Sac Bee, Thurs 3/22: "Federal judge orders major power wholesaler to sell t= o=20 California" San Jose Mercury News Thurs, 3/22: "State falling short on pacts that provi= de=20 low-cost energy" Contra Costa Times, Thurs 3/22: "Crisis saps state surplus" Sac Bee. Fri, 3/23: "Bill to pay small energy firms stalls" Sac Bee, Fri., 3/23: "House panel ends energy hearings -- will it step in? Sac Bee, Fri, 3/23: "Dan Walters: Crisis deepens: politicos panic" San Diego Union, Fri., 3/23: "Report says power wholesalers overcharged=20 state $6 billion" San Diego Union, Fri, 3/23: "Disappearing state surplus sparks alarm" San Diego Union, Fri., 3/23: "Outages darken economic outlook in state, so= me=20 say" San Diego Union, Fri., 3/23: "Out-of-state generators question power=20 regulators' authority " San Diego Union, Fri., 3/23: "Allegheny Energy makes big California=20 connection" LA Times, Fri, 3/23: "Judge Frees Small Firm From Edison Contract " SF Chron, Fri, 3/23: "Lodi Defies Order for Blackouts=20 Utility tells PG&E to 'pay the bills' " SF Chron, Fri, 3/23: "Coming Down to the Wire=20 State legislators battle over alternative energy bills" SF Chron, Fri, 3/23: "Grid Operators Push to Prevent Overcharging=20 They say regulators must be aggressive to stop billing abuses"=20 Mercury News, Fri., 3/23: "State's bill for energy could double this year" Mercury News, Fri., 3/23: "Plan for alternate power plants stalls" ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- Report: Power wholesalers overcharged California $5.5 billion=20 DON THOMPSON, Associated Press Writer Thursday, March 22, 2001=20 ,2001 Associated Press=20 (03-22) 11:41 PST SACRAMENTO, Calif. (AP) -- Electricity wholesalers have= =20 overcharged California more than $5 billion since May by manipulating the= =20 energy market, according to a report prepared for power grid managers.=20 The Independent System Operator will file the findings with federal=20 regulators and ask for a refund, ISO spokesman Patrick Dorinson said.=20 The state auditor also said Thursday that the state's 1996 deregulation law= =20 encouraged both buyers and sellers of electricity to ``manipulate wholesale= =20 prices to their advantage'' by underestimating supply and demand.=20 The auditor's report lays out what it calls ``a complex combination'' of=20 deficiencies and misjudgments it says led to the state's power problems.=20 According to the ISO report, five in-state power suppliers and 16 importers= =20 frequently offered electricity at prices higher than it cost them to produc= e=20 -- effectively withholding supplies -- or didn't bid at all when they were= =20 able to generate power.=20 ISO Director of Market Analysis Anjali Sheffrin presented the findings at a= =20 conference in Berkeley last week.=20 The companies have denied overcharging California and have said they expect= =20 the Federal Energy Regulatory Commission will determine their prices were= =20 justified.=20 The commission has recently stepped up scrutiny of power companies' behavio= r=20 during California's power crisis, asking suppliers to justify $124 million = in=20 sales during the first two months of the year or refund the money. Critics= =20 claim thousands of additional questionable sales are not being challenged.= =20 California has been spending about $45 million a day -- $4.2 billion since= =20 January -- to purchase power for Pacific Gas and Electric Co. and Southern= =20 California Edison. Both utilities, the state's largest, have been cut off b= y=20 electricity wholesalers because their credit is almost worthless.=20 Edison and PG&E say they are nearly $14 billion in debt due to soaring=20 wholesale power costs. The state's deregulation law blocks them from=20 recovering the costs from customers.=20 State Controller Kathleen Connell said Wednesday that the state's=20 power-buying is gutting its budget surplus.=20 Since the state started making emergency power buys, the surplus has fallen= =20 from $8.5 billion to about $3.2 billion, she said.=20 Connell ordered an audit of the power buys, saying Gov. Gray Davis is=20 withholding key financial information from her office and the Legislature.= =20 She said she would refuse to transfer $5.6 billion into a ``rainy day fund'= '=20 she said was set up to impress Wall Street as the state prepares to issue $= 10=20 billion in revenue bonds to cover its power buys.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt, Connell said.=20 Sandy Harrison, spokesman for the state Department of Finance, and Keely=20 Bosler, of the Legislative Analyst's Office, said such transfers are routin= e=20 and required by law.=20 ``The law says she has to do it. The law does not give her the power to=20 demand that kind of audit information,'' Harrison said.=20 Davis spokesman Steve Maviglio said the administration has released the=20 financial information it can without jeopardizing negotiations for long-ter= m=20 power contracts with wholesalers.=20 Also Wednesday, a federal judge ordered a major wholesaler, Reliant Energy= =20 Services, to continue selling power to California despite its fear that it= =20 will not be paid.=20 The ISO buys power from companies like Reliant on behalf of utilities in=20 attempts to fend off rolling blackouts like those that hit the state this= =20 week and during two days in January.=20 ---------------------------------------------------------------------------= --- --------------------------------- Reliant To Appeal Fed Judge Ruling To Sell Pwr To Calif 03/22/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) LOS ANGELES -(Dow Jones)- Reliant Energy Inc. (REI) said Thursday it will= =20 immediately file with the 9th Circuit Court of Appeals in San Francisco in= =20 response to a federal judge's ruling late Wednesday that the company contin= ue=20 selling power to California regardless of whether it is paid.=20 U.S. District Court Judge Frank Damrell granted California's Independent=20 System Operator, which makes last minute power purchases in the spot market= ,=20 a preliminary injunction against Reliant, saying Californians were at risk = of=20 irreparable harm if Reliant stopped selling power to the state. The ISO, manager of the state's electricity grid, said the judge's ruling= =20 will allow the agency to keep the lights on in California.=20 Reliant, which is owed more than $300 million from the state's cash-strappe= d=20 utilities, supplies California with about 3,000 megawatts of electricity fr= om=20 power plants it owns in the state.=20 Reliant spokesman Richard Wheatley said the state Department of Water=20 Resources, the agency that buys California's bulk power needs on behalf of= =20 PG&E Corp. (PCG) unit Pacific Gas & Electric, Edison International (EIX) un= it=20 Southern California Edison and Sempra Energy (SRE) unit San Diego Gas &=20 Electric, should back the ISO's last minute power purchases.=20 In a filing with the Securities and Commission, Reliant said it is owed $10= 8=20 million by the DWR for last minute power purchases the ISO made during the= =20 six weeks prior to the agreement Reliant made with the DWR.=20 Damrell dismissed Reliant's claim, saying he does not have the authority to= =20 force the DWR to pay for that power.=20 "We're going to immediately appeal Judge Damrell's order," Wheatley said.= =20 "Clearly the judge understands the implications of his order. We are requir= ed=20 to do business with creditworthy entities. Unfortuantely the judge did not= =20 force the ISO to post a surety bond, which would allowed us to do business= =20 with the ISO."=20 Gov. Gray Davis has said the state is not responsible for the last minute= =20 power purchases the ISO makes, despite a law passed authorizing the DWR to= =20 buy power on behalf of the utilities.=20 Wheatley added that the company will also seek relief on the issue at the= =20 Federal Energy Regulatory Commission. Damrell's ruling remains in effect=20 until the Federal Energy Regulatory Commission rules on the matter.=20 Separately, Wheatley said a short-term power supply contract that Reliant= =20 signed with the DWR expired Monday and the DWR has not renewed the contract= .=20 A spokesman for the DWR would not comment on the issue.=20 -By Jason Leopold; Dow Jones Newswires; 323-658-3874;=20 jason.leopold@dowjones.com ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Federal judge orders major power wholesaler to sell to California Updated: March 21, 2001 - 8:23 p.m.=20 A federal judge issued a preliminary injunction Wednesday ordering a major= =20 electricity wholesaler to continue selling to California despite its fear= =20 that it will not get paid.=20 U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of= =20 irreparable harm if Reliant Energy Services stopped selling power to the=20 Independent System Operator, which oversees the state's power grid. The ISO= =20 buys last-minute power on behalf of utilities to fill gaps in supply to try= =20 to fend off blackouts.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= .=20 The state has been spending about $50 million a day on power for Pacific Ga= s=20 and Electric Co. and Southern California Edison, both denied credit by=20 suppliers after amassing billions of dollars in debts. The judge said he had no authority to force the DWR to pay for that power.= =20 Gov. Gray Davis has said the state isn't responsible for purchasing the=20 costly last-minute power ISO buys for Edison and PG&E, despite a law=20 authorizing state power purchases on the utilities' behalf.=20 ISO attorney Charles Robinson said the ruling gives ISO operators "a tool t= o=20 assist them in keeping the lights on in California."=20 "Had the decision gone the other way, one could expect other generators to= =20 simply ignore emergency orders," Robinson said.=20 Damrell's preliminary injunction will remain in effect until the Federal=20 Energy Regulatory Commission rules on the matter.=20 Damrell denied the ISO's request for preliminary injunctions against three= =20 other wholesalers, Dynegy, AES and Williams, who agreed to continue selling= =20 to the ISO pending the FERC ruling.=20 Spokesmen for Reliant, Dynegy, AES and Williams were out of the office=20 Wednesday night and didn't immediately return calls from The Associated Pre= ss=20 seeking comment on the ruling.=20 The ISO went to court in February after a federal emergency order requiring= =20 the power sales expired. The judge then issued a temporary restraining orde= r,=20 requiring the sales, but dropped it after the suppliers agreed to continue= =20 sales to California, pending his Wednesday ruling.=20 The ISO said it would lose about 3,600 megawatts if the suppliers pulled ou= t,=20 enough power for about 2.7 million households. One megawatt is enough for= =20 roughly 750 homes.=20 Grid officials said Reliant's share alone is about 3,000 megawatts. Reliant= =20 said the amount at issue actually is less than a fourth of that, because mo= st=20 of the power is committed under long-term contracts.=20 Reliant, which provides about 9 percent of the state's power, worries it=20 won't get paid due to the financial troubles of PG&E and Edison.=20 PG&E and Edison say that together they have lost about $13 billion since Ju= ne=20 due to soaring wholesale electricity costs that California's 1996=20 deregulation law bars them from passing onto customers.=20 At the same time, the state has faced a tight electricity supply, due in pa= rt=20 to California power plant shutdowns for maintenance and to a tight=20 hydroelectric supply in the Pacific Northwest.=20 Managers of the state power grid imposed rolling blackouts across the state= =20 Monday and Tuesday as supply fell short of demand. Wednesday, cooling=20 temperatures and the completion of repairs at several power plants allowed= =20 the state to avoid blackouts. State Controller Kathleen Connell said Wednesday that the energy crunch als= o=20 imperils California's financial health. Connell said the state's power-buying on behalf of Edison and PG&E is is=20 gutting its budget surplus. Since the state started making emergency power= =20 buys in January, the surplus has fallen from $8.5 billion to about $3.2=20 billion, she said.=20 Connell ordered an audit of the state's power-buying, saying Davis is=20 withholding key financial information from her office and the Legislature.= =20 She is refusing a request by Davis and the Legislature to transfer $5.6=20 billion into a "rainy day fund" she said was set up to impress Wall Street = as=20 the state prepares to issue $10 billion in revenue bonds to cover its=20 power-buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt, Connell said.=20 Sandy Harrison, spokesman for the state Department of Finance, and Keely=20 Bosler of the Legislative Analyst's Office, said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 "The law says she has to do it. The law does not give her the power to dema= nd=20 that kind of audit information," Harrison said.=20 He said the state's budget isn't in danger because it will be repaid with t= he=20 $10 billion in long-term debt.=20 Wells Fargo & Co. chief economist Sung Won Sohn said he sees little progres= s=20 in efforts to fix the state's power problems and end state electricity=20 purchases.=20 "If we're going to pour money into a bottomless pit, I would worry about th= e=20 state's finances," he said. "At some point we're going to run out of money.= " The controller's criticism of fellow Democrat Davis won support from Assemb= ly=20 Republicans and Secretary of State Bill Jones, a Republican considering=20 challenging Davis next year.=20 Jones said he wants to announce his own plan to solve the state's energy=20 woes, but can't unless Davis releases more financial details.=20 Davis spokesman Steve Maviglio dismissed the criticism. "Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency," he said.=20 Maviglio said the administration has released the financial information it= =20 can without jeopardizing negotiations for long-term power contracts with=20 wholesalers.=20 Also Wednesday, a report by Davis' chief power negotiator appears to show= =20 that as much as 75 percent of the state's power purchases will have to be o= n=20 the expensive short-term market this summer, said Sen. Debra Bowen, D-Marin= a=20 del Rey, chairwoman of the Senate Energy Committee.=20 "The prices may be phenomenol," she said, particularly given predicted=20 hydroelectric shortages due to drought in the Pacific Northwest.=20 The report by David Freeman, who is negotiating the state's long-term power= =20 contracts, shows California has finalized 19 contracts and has 25 agreement= s=20 in principle. Freeman said DWR is continuing to negotiate other contracts. Bowen said FERC should impose short-term price caps or let generators to=20 charge enough to make a reasonable profit "or we could be subject to enormo= us=20 price-gouging this summer."=20 -- Associated Press ---------------------------------------------------------------------------= --- ----------------------------------------------------------------- State falling short on pacts that provide low-cost energy=20 Published Thursday, March 22, 2001, in the San Jose Mercury News=20 BY CHRIS O'BRIEN AND JOHN WOOLFOLK=20 Mercury News=20 The state has signed low-cost contracts for just a third of the energy it= =20 needs this year, raising the prospect that California could be forced to bu= y=20 much of its electricity this summer on the expensive spot market.=20 A spokesman for Gov. Gray Davis conceded Wednesday that the state will be i= n=20 trouble without more contracts, but insisted California will meet its needs= =20 through conservation and additional long-term deals for cheap electricity.= =20 The state, according to a report released Wednesday, has fallen far short o= f=20 the governor's goal of filling almost all its electricity needs through suc= h=20 deals. In fact, the state has lined up contracts for about half the amount= =20 Davis had projected earlier this month.=20 If the state has to rely heavily on the volatile spot market, where the pri= ce=20 of electricity this summer could reach five times the state's contract pric= e,=20 pressure could mount to raise the cap on the electricity rates consumers pa= y.=20 But Steven Maviglio, the governor's spokesman, said, ``The governor has sai= d=20 he's committed to work this in the existing rate structure, so that's the= =20 plan.''=20 In the report sent to state lawmakers, the state Department of Water=20 Resources indicated that it had secured just more than 20 million=20 megawatt-hours for this year, leaving it far short of the 60 million=20 megawatt-hours needed.=20 ``This is just a progress report,'' Maviglio said. ``They did all this in= =20 three weeks, which is pretty amazing when you think about it, and we have a= =20 lot more to do.''=20 The state got into the power buying business in January, supplying it to th= e=20 state's nearly bankrupt utilities.=20 The state negotiated long-term contracts with generators to supply that pow= er=20 at a reduced rate. Based on the report, the state will pay an average of $6= 8=20 per megawatt-hour over the next 10 years -- significantly less than in=20 December when prices spiked higher than $300 per megawatt-hour but not as l= ow=20 as the $55 Davis hoped to reach.=20 Most of this power, however, won't be delivered until 2004. From 2004 to=20 2006, the Department of Water Resources estimates, it has enough power unde= r=20 contract. Until then, the amount falls short.=20 In 2001, it appears the state has about one-third of the power it needs. Th= e=20 gap closes to about half in 2002 and two-thirds in 2003.=20 At a news conference in Los Angeles two weeks ago, Davis said the state wou= ld=20 have to buy only 30 to 45 percent of the power it needs this summer on the= =20 open market.=20 At the time, critics said with only two-thirds of the power under contract,= a=20 rate increase was almost inevitable. Even Davis' chief negotiator, S. David= =20 Freeman, offered a bleak assessment for the summer, saying that all availab= le=20 electricity has already been sold.=20 ``We'll be subject to extremely high prices,'' said Frank Wolak, a Stanford= =20 professor who sits on a market committee for the Independent System Operato= r,=20 the agency that runs the state power grid.=20 Wolak said there are two main hopes for avoiding a price increase this=20 summer: Federal officials could cap the wholesale price, a step they've=20 resisted, or Californians can conserve an unprecedented amount of power. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Crisis saps state surplus POWER CRISIS=20 Controller moves to block a transfer of funds, saying the $8.5 billion=20 surplus has been cut more than half since January=20 By Mike Taugher TIMES STAFF WRITER=20 The energy crisis has bled California's once-touted budget surplus by more= =20 than half since taxpayers began buying electricity two months ago, leading = a=20 top state finance official Wednesday to order an audit of the power purchas= es=20 and block Gov. Gray Davis' plan to transfer funds into a reserve account.= =20 A booming economy last year produced a budget surplus that totaled $8.5=20 billion in January. But that figure now stands at about $3.2 billion,=20 according to Controller Kathleen Connell.=20 "We started this year with a generous budget surplus," Connell said in a=20 statement announcing her decision to block what Davis administration=20 officials described as a routine transfer of surplus money. "The energy=20 crisis has taken much of that away, and this transfer on top of the=20 electricity purchases would put the fund at risk."=20 Meanwhile, the Davis administration released a report by David Freeman, the= =20 governor's chief negotiator on power purchases, on the progress of executin= g=20 long-term agreements meant to stabilize the power buys.=20 According to the report, only about 40 percent of the electricity needed fr= om=20 the open market this year has been lined up. That means the state could be= =20 forced to continue buying a substantial amount of power on the highly=20 expensive spot market and further drain its coffers.=20 And a key regulatory panel is scheduled next week to issue a ruling that=20 would determine how quickly state funds will be replenished when it decides= =20 what portion of electric bill payments should be allocated to the state=20 treasury, a decision that could include a rate increase to fully repay=20 taxpayers without further crippling the state's two largest electric=20 utilities.=20 The Public Utilities Commission also will consider whether it will force th= e=20 utilities to pay alternative energy producers, whose shutdowns this week=20 contributed to blackouts.=20 Connell's action underscores a growing nervousness over the sheer volume of= =20 money that is being poured into energy buys, despite the fact that state=20 officials plan to replenish the treasury with up to $10 billion in loans th= at=20 will be repaid by electricity consumers.=20 The state has committed to spending $4.2 billion to date to keep lights on= =20 since taxpayers were forced in mid-January to take over electricity buys fr= om=20 the financially crippled utilities, Pacific Gas & Electric Co. and Southern= =20 California Edison. Tax money is going out at a clip of about $50 million a= =20 day.=20 High prices already have brought PG&E and Edison to the brink of bankruptcy= ,=20 and now the state's surplus is at risk, according to Connell.=20 In addition to requesting an audit and announcing her intention to delay th= e=20 transfer to the reserve account, Connell said she wanted the administration= =20 to send her office more information about the electricity purchases.=20 Davis' representatives questioned Connell's authority in trying to block th= e=20 funds transfer, which they called a routine accounting procedure, and accus= ed=20 her of making political hay.=20 "It is not helpful to the taxpayers or ratepayers or the people who just wa= nt=20 to keep the lights on, it isn't helpful to have the situation muddied like= =20 this," said Sandy Harrison, a Finance Department spokesperson. "We're sorry= =20 it came up in this manner."=20 Connell and the administration have butted heads in recent weeks. The=20 controller wants to post details of the state's electricity purchases on he= r=20 Web site, a plan that have been delayed under pressure from Davis because o= f=20 the governor's concerns that releasing those details will allow power=20 generators and traders to sell at higher prices.=20 Harrison said administration officials believe Connell lacks the authority= =20 either to block the funds transfer to a reserve account or to audit the sta= te=20 water resources department.=20 Two days of widespread blackouts this week show how vulnerable the power gr= id=20 is to financial glitches. Although several factors combined to produce the= =20 blackouts, state power officials say the outages could have been avoided if= =20 the utilities were paying their bills to alternative energy producers.=20 Many of those producers, including clean-burning natural gas power plants,= =20 wind, solar and geothermal energy developers, shut down enough production t= o=20 spell the difference between grid reliability and blackouts Monday and=20 Tuesday.=20 Davis called the utilities' failure to pay bills to those producers, known = as=20 qualifying facilities, "immoral." The QFs were either unable to buy gas fro= m=20 their suppliers or were frustrated with the utilities' failure to pay them.= =20 "The utilities hoarded billions of dollars since November without paying an= y=20 money out," said Davis spokesman Steve Maviglio. "They've got the money --= =20 we're pulling the trigger to make them pay it."=20 The utilities, however, say they are doing all they can to conserve enough= =20 cash to continue operating. Together, they owe the QFs about $1.5 billion.= =20 Next week, the PUC is scheduled to consider whether to force the utilities = to=20 heed Davis' demand to pay the QFs, and it might also decide how much of=20 ratepayers' bill payments will be used to refund taxpayers for power buys.= =20 PG&E says that under a formula proposed by the administration, the water=20 resources department would receive about 40 percent of the money collected= =20 from ratepayers for power purchases.=20 The rest of that money, about $240 million, would have to be divided among= =20 QFs, existing power contracts, operating PG&E's nuclear and hydroelectric= =20 plants, and what hour-by-hour purchases the utility still must make on the= =20 spot market, according to PG&E spokesman John Nelson.=20 "There isn't enough to do that," he said.=20 That is making it increasingly likely that electric bills will be hiked,=20 according to a growing chorus of officials and experts.=20 Unless rates are raised, Nelson said, the only entity that can absorb a lac= k=20 of payment or a partial payment is the state treasury. Cutting off any othe= rs=20 will lead to electricity becoming unavailable and more blackouts, he said.= =20 "If they do it under existing rates -- given that the existing pool of mone= y=20 is not enough -- who doesn't get paid or who gets a partial payment?" Nelso= n=20 said. "What's the only entity left with wiggle room? The state."=20 Rate hikes are also a sticking point in negotiations to bail out the=20 utilities through purchase of their transmission lines and other assets,=20 Maviglio said.=20 "They want rate increases of significant magnitude, and we're not going=20 there," he said.=20 WE CAN TRIM STORY HERE IF NECESSARY, BUT KEEP TAGLINES AT BOTTOM=20 About one-third the electricity needed by the customers of California's thr= ee=20 major utility companies is produced by the companies themselves, one-third= =20 comes from alternative producers who use environmentally friendly technique= s=20 and one-third is bought on the open market.=20 The state stepped in to buy the one-third needed from the open market after= =20 the utility companies ran out of cash and credit in January to make the=20 purchases themselves.=20 But that electricity has proven to be enormously expensive, and Davis has= =20 planned to lower those prices by committing to long-term purchases.=20 Freeman's report on the progress of those long-term purchases, dated March = 15=20 but released this week, said the state has finalized 19 contracts with seve= n=20 suppliers and reached 25 additional agreements.=20 Mike Taugher covers the environment and energy. Reach him at 925-943-8324 o= r=20 mtaugher@cctimes.com.=20 Staff writer Andrew LaMar contributed to this story. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Bill to pay small energy firms stalls By Kevin Yamamura, Dale Kasler and Jim Sanders Bee Staff Writers (Published March 23, 2001)=20 A quickly melded proposal that would assure payments for alternative energy= =20 suppliers whose money woes contributed to power blackouts this week stalled= =20 Thursday in a divided Legislature.=20 The state Senate passed the bill, AB 8x, but with Republicans balking, it w= as=20 rejected in the Assembly along party lines. Assembly leaders said they may= =20 try again today.=20 For most of Thursday, lawmakers scrutinized legislation they had overhauled= =20 the night before to include Gov. Gray Davis' plan to force utilities to pay= =20 solar, wind and small gas-fired suppliers. Such providers, called "qualifie= d=20 facilities," or QFs, provide more than 20 percent of California's=20 electricity, and their shutdowns were partly to blame for rolling blackouts= =20 Monday and Tuesday.=20 Under the Democratic governor's plan, the state Public Utilities Commission= =20 would determine prices at which alternative generators may sell power, but= =20 legislation is needed to authorize the PUC action.=20 Lawmakers faced time pressures Thursday. They wanted to pass the bill quick= ly=20 so the PUC could act next week and legislators could embark Monday on an=20 annual three-day lobbying trip in Washington, D.C.=20 Assembly Speaker Robert Hertzberg, D-Sherman Oaks, said the Republicans'=20 rejection of AB 8x could jeopardize more than $4 billion the state has spen= t=20 or allocated for electricity during the energy crisis.=20 Hertzberg said producers of alternative energy, which are owed more than $1= =20 billion, have threatened to drag debt-ridden utilities into involuntary=20 bankruptcy if the Legislature failed to pass the measure.=20 "They said it, and I believe it," Hertzberg said. If such bankruptcies occu= r,=20 he added, the state with its multibillion-dollar debt would become "just=20 another creditor in a pile of creditors."=20 But Assembly Republican leader Bill Campbell of Villa Park said the=20 finger-pointing is unfair. Passage of AB 8x would not necessarily prevent= =20 bankruptcies, he said.=20 One alternative energy provider won a crucial court ruling Thursday that=20 staved off, at least for a while, threats by some creditors to haul one or= =20 both big utilities into bankruptcy court for nonpayment of bills.=20 CalEnergy Co. Inc. won the right to sell its geothermal power, which was=20 contracted to Southern California Edison, on the open market. CalEnergy sai= d=20 it is owed $45 million by Edison.=20 If the Imperial County judge hadn't ruled in CalEnergy's favor, the company= =20 and seven other QFs "were fully prepared" to file an involuntary bankruptcy= =20 petition against Edison this morning, said David Sokol, chief executive of= =20 CalEnergy's parent, MidAmerican Energy Holdings Co. of Des Moines, Iowa.=20 "That is currently off the table."=20 An involuntary bankruptcy proceeding would take California's energy crisis= =20 into uncharted territory, although a bankruptcy judge would have the leeway= =20 to reject the filing.=20 Freed from its contract with Edison, CalEnergy will move to sell its=20 electricity "to people who will pay for it," Sokol said.=20 Besides calming the bankruptcy movement temporarily, the ruling also could= =20 prompt other alternative energy providers -- hundreds of which have shut do= wn=20 because of nonpayment by Edison and Pacific Gas and Electric Co. -- to foll= ow=20 CalEnergy's example and find other buyers for their electricity, said Gary= =20 Ackerman of the Western Power Trading Forum, an association of generators.= =20 Assembly Republicans said they felt the Senate's decision to package three= =20 important energy issues into a single bill was an attempt to ramrod=20 legislation through both houses.=20 "We have to stand and say no," Campbell said during floor debate.=20 Besides determining alternative generator payments, the bill would change a= n=20 earlier law by capping the value of bonds the state may sell for power=20 purchases at $10 billion. It also would extend to large businesses an=20 existing rate cap in the San Diego Gas and Electric Co. service area.=20 And it would earmark a portion of rates paid by utility customers to fund t= he=20 state's ongoing power purchases. Within a week, the state will have spent= =20 $4.2 billion on power since January.=20 Without the bill, some legislators fear, Pacific Gas and Electric and=20 Southern California Edison would be reimbursed before the state.=20 "They have got (some) gall to go to the PUC and say they're going to go to= =20 court to keep our money -- to keep our money to pay off their creditors,"= =20 said Senate President Pro Tem John Burton, D-San Francisco.=20 Most of the bill's controversy, however, centered on how the PUC would trea= t=20 gas-fired alternative generators.=20 The commission issued a revised draft decision Wednesday that would impose= =20 prices for qualifying facilities at $79 a megawatt-hour for five-year=20 contracts or $69 a megawatt-hour for 10 years.=20 But those producers that use natural gas -- representing about two-thirds o= f=20 the alternative energy providers in California -- spent Thursday arguing th= at=20 Davis' plan to rescue them would all but guarantee that they would go out o= f=20 business instead.=20 The plan -- ordering Edison and PG&E to pay them a fixed price for their=20 power -- would set rates well below the cost of natural gas, they said.=20 Democratic lawmakers tried to assure such producers that the PUC would set= =20 prices that make business sense, even obtaining a letter to that effect fro= m=20 Loretta Lynch, who heads the commission.=20 Davis has vowed to fine Edison and PG&E if they don't pay alternative=20 producers for future deliveries. But Sokol said his company isn't convinced= =20 that Edison will pay.=20 Calling Edison a "confrontive, in-your-face, nasty organization," Sokol sai= d=20 the utility was "sitting on $2 billion" and not paying its bills. Edison, i= n=20 a Securities and Exchange Commission filing Thursday, said its debts outwei= gh=20 its cash reserves by $722 million.=20 The Senate sent the Assembly two other bills that deal specifically with=20 supply and demand. The first, SB 5x, would spend about $1 billion on energy= =20 conservation and low-income assistance programs. The other, SB 28x, would= =20 streamline siting procedures for power plant construction.=20 In separate energy-related matters Thursday, the Assembly approved:=20 AB 21x, which would allow businesses, industries or other electrical=20 customers to negotiate private contracts with energy providers.=20 Nine energy bills designed to generate or save 665 megawatts of electricity= =20 -- including 345 megawatts this summer. One megawatt is enough electricity = to=20 light about 1,000 homes.=20 The state put power emergencies behind it, after dropping out of a Stage 1= =20 alert late Wednesday. The California Independent System Operator, which=20 manages the state's power transmission grid, was predicting no further aler= ts=20 this week. It expected cooling temperatures and a regular dropoff in=20 electricity use on Fridays to lessen demand, at the same time that more pow= er=20 plants were returning to service.=20 Bee staff writer Carrie Peyton contributed to this report.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- House panel ends energy hearings -- will it step in? By David Whitney Bee Washington Bureau (Published March 23, 2001)=20 WASHINGTON -- A key House panel wrapped up a series of hearings on the=20 California electricity crisis Thursday and now will decide whether to come = to=20 the state's aid with legislation.=20 But the panel's Texas chairman made clear that West Coast price controls=20 won't be on the table.=20 "Caps will not be in anything I am submitting," said Rep. Joe Barton,=20 chairman of the House Energy and Commerce Committee's energy and air qualit= y=20 subcommittee.=20 Some form of federal controls to hold down escalating wholesale prices this= =20 summer because of power shortages has been the most frequent appeal of=20 witnesses who testified before the panel during roughly 30 hours of hearing= s=20 over five days.=20 Such controls have been sought by the governors of California, Oregon and= =20 Washington. As power shortages are forecast for other regions, states like= =20 New York also have appealed for temporary price controls to halt gouging.= =20 But the Federal Energy Regulatory Commission, which is responsible for=20 enforcing reasonable wholesale rates under the Federal Power Act, has refus= ed=20 to impose them, and the Bush administration is bolstering that decision by= =20 opposing any legislation that would compel such action.=20 Barton, in a brief hallway interview, declined to say what other legislativ= e=20 remedies he might propose to address the worsening California situation.=20 He said he expects to submit a list of ideas to the White House today, and= =20 after receiving comment on it, sit down with other committee Republicans an= d=20 Democrats next week to see if any legislation is in order.=20 "If we are going to do anything to help California or the West this summer,= =20 we have to make it law within the next month or six weeks," Barton said.=20 Even the panel's senior Democrat, Virginia Rep. Rick Boucher, was urging a= =20 "careful and deliberate approach" to the California crisis, which he said w= as=20 largely of the state's own making.=20 There are steps Congress might take to provide some help to the West, such = as=20 more money for conservation and relaxed federal regulation of air quality= =20 standards. That would permit older, more polluting generators to operate=20 through a long, hot summer when electricity demand could exceed supply by= =20 about 3,000 megawatts, roughly the amount needed to power 3 million homes.= =20 But Alan Lloyd, chairman of the California Air Resources Board, said power= =20 production already is being maximized without sacrificing air quality.=20 "Simply put, no essential electricity generation has been curtailed due to= =20 air emission limitations," he said. "California's programs to protect publi= c=20 health are not major factors in the electricity shortages experienced to=20 date."=20 The concern is that as shortages turn into more rolling blackouts, wholesal= e=20 prices will jump even higher and steadily bleed the economies of California= =20 and the West Coast.=20 William L. Massey, the lone member of the energy regulatory commission who= =20 supports price controls, said at a Tuesday hearing that without them the We= st=20 Coast faces economic catastrophe this summer.=20 It was evident from the comments of some Republicans that they think their= =20 party could capitalize politically from a difficult summer.=20 "If they had a bad summer, it could show up in the polls," said Rep. Charli= e=20 Norwood, R-Ga. "And sometimes that's not a bad idea."=20 One of the most dramatic exchanges during the weeklong hearings came Thursd= ay=20 with S. David Freeman, the former general manager of the Sacramento Municip= al=20 Utility District who now heads the Los Angeles Department of Water and Powe= r.=20 He recently was named Gov. Gray Davis' chief negotiator with power generato= rs=20 for long-term contracts to stabilize future deliveries.=20 "Don't feel sorry for California," Freeman said. "We're going to come out o= f=20 this stronger than ever."=20 But Freeman said it will be a year or two before all the fixes are in place= ,=20 and in the meantime the region desperately needs Congress' help to force th= e=20 FERC into controlling wholesale prices, which witnesses said are likely to= =20 rise from $7 billion last year to as much as $70 billion or more this year.= =20 "We recognize that the current administration and various legislators have= =20 their own opinion as to the California situation," Freeman said. "But my=20 personal plea is that if the federal government is not going to help us, th= e=20 least it should do is refrain from legislation that attempts to tell us wha= t=20 to do."=20 Barton perked up at that idea.=20 "Leave California alone, huh?" Barton said. "That might be a good motto."= =20 ---------------------------------------------------------------------------= --- --------------------- Dan Walters: Crisis deepens: politicos panic (Published March 23, 2001)=20 That choking sound you hear is California's political class shifting into= =20 near-panic mode as it realizes that the energy crisis is on the verge of=20 becoming a full-scale meltdown, with utilities forced into bankruptcy and= =20 consumers hammered by severe and prolonged power blackouts and soaring=20 electricity bills.=20 The Legislature, which had been content to allow Gov. Gray Davis to handle= =20 the crisis on his own, suddenly came to life Thursday, jolted by this week'= s=20 unexpected rolling blackouts and threats by creditors to force the utilitie= s=20 into bankruptcy court. Lawmakers quickly fashioned a basketful of legislati= on=20 aimed -- or so they hope -- at increasing power supplies, promoting=20 conservation and relieving the financial pressure on utilities and=20 electricity generators. But it may be too little, too late -- and Davis and= =20 other politicians are already pointing fingers of blame, aware that a=20 political price will be paid if the apocalypse strikes.=20 While Davis chants his mantra that he inherited a fatally flawed utility=20 deregulation scheme from predecessor Pete Wilson, Republicans are blaming= =20 Davis for moving too slowly after the crisis first surfaced last summer, an= d=20 even some of Davis' fellow Democrats are distancing themselves from the=20 governor.=20 "Deregulation was a product of a Republican governor, a Republican author a= nd=20 a Republican PUC (Public Utilities Commission) that was unduly impatient,"= =20 Davis said at one point this week as the Capitol buzzed with private=20 negotiations and public posturing.=20 A day later, however, state Controller Kathleen Connell, a Democrat, issued= a=20 warning that Davis' power purchases, running at $50 million a day, had=20 already drawn down state budget reserves by nearly two-thirds, and she=20 refused to authorize additional transfers. It was a direct shot by Connell = at=20 Davis, an old rival, and came just a day after the governor had endorsed a= =20 Connell foe, Antonio Villaraigosa, in the duel for mayor of Los Angeles.=20 Other Democrats didn't join Connell's direct challenge to Davis, but there= =20 is, nevertheless, a growing concern among Democratic legislators that the= =20 power purchases are costing many billions of dollars more than the governor= =20 had projected and could place the state budget in jeopardy. They're nervous= =20 because Davis has refused to reveal, even to legislators, exactly how much= =20 power the state is buying each day and how much it is paying.=20 From the few details that have been disclosed, it's clear that the state is= =20 spending about $1.5 billion a month, which would wipe out the state's=20 reserves by midsummer. It's also becoming increasingly clear that Davis=20 probably can't make good on his promise to avoid major consumer rate=20 increases, unless the state is willing to plunge deeply and semi-permanentl= y=20 into debt to underwrite wholesale costs, or unless federal authorities orde= r=20 huge refunds from power suppliers.=20 Rates in areas served by private utilities have risen only slightly while t= he=20 costs, first to utilities and later to the state, soared. Data from the=20 administration and utilities, when collated, indicate that the state is in= =20 line to collect just 20 cents for every dollar it's spending on power=20 purchases, and the gap will increase as summer heat drives up demand.=20 Privately, some economists say that private utility rates will have to rise= =20 33 percent to 50 percent to cover costs of current power supplies, plus=20 utilities' past debts to generators and the state's purchase of the=20 utilities' transmission system, if that deal is made final.=20 "It's ultimately going to break down, and the ratepayer is going to pay for= =20 it one way or the other," Republican Sen. Jim Battin said during one of=20 Thursday's many committee hearings on utility legislation. No one disagreed= =20 with him.=20 DAN WALTERS' column appears daily, except Saturday. Mail: P.O. Box 15779,= =20 Sacramento, CA 95852; phone (916) 321-1195; fax: (781) 846-8350 E-mail: dwalters@sacbee.com Recent columns: http://www.capitolalert.com/voices/index_walters.html=20 ---------------------------------------------------------------------------= --- ------------------------------------------ Report says power wholesalers overcharged state $6 billion=20 By Don Thompson ASSOCIATED PRESS=20 March 22, 2001=20 SACRAMENTO =01) Electricity wholesalers have overcharged California more th= an=20 $6.2 billion by manipulating the energy market, according to a report by an= =20 economist working for power grid managers.=20 The Independent System Operator planned to file the findings with federal= =20 regulators Thursday, and ask for a refund, said ISO spokesman Patrick=20 Dorinson.=20 In a related development, the state auditor said Thursday that the state's= =20 1996 deregulation law encouraged both buyers and sellers of electricity to= =20 "manipulate wholesale prices to their advantage" by underestimating both=20 supply and demand.=20 Disappearing state surplus sparks alarm=20 Outages darken economic outlook in state, some say=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 The auditor's report lays out what it calls "a complex combination" of=20 deficiencies and misjudgments it says led to the state's power problems.=20 The ISO's filing came a day after the state controller complained that a=20 relentless energy crisis is jeopardizing California's financial future.=20 Since May, the companies manipulated the market by bidding at excessive=20 prices, effectively withholding supplies or by not bidding at all when they= =20 had generation capability available, according to the ISO study.=20 ISO Director of Market Analysis Anjali Sheffrin presented the findings at a= n=20 energy conference at the University of California, Berkeley, last week.=20 The companies have denied overcharging California and have said they expect= =20 the Federal Energy Regulatory Commission will determine their prices were= =20 justified.=20 In a burst of activity after weeks of delay, both houses of the Legislature= =20 approved bills Thursday designed to ease the energy crisis.=20 The state Senate approved measures to encourage energy conservation and spe= ed=20 up power plant construction.=20 Topping that, the Assembly sent the Senate 14 energy-related bills, includi= ng=20 $455 million in loans and grants to encourage energy efficiency and=20 conservation and alternative energy projects by this summer.=20 One of the Assembly bills would require new energy plants approved by the= =20 state to sell their power within California before they offer it to other= =20 states.=20 "The (California) Energy Commission says for every day we delay this bill= =20 there are 20 megawatts that could be saved that we're not saving," said sta= te=20 Sen. Byron Sher, D-Stanford, as senators voted 28-10 to send his conservati= on=20 measure to the Assembly.=20 Senators also approved another Sher bill speeding up the siting of power=20 plants. It went to the Assembly on a 37-1 vote.=20 Meanwhile, a federal judge issued a preliminary injunction Wednesday orderi= ng=20 one of the companies named in the ISO filing, Reliant Energy Services, to= =20 continue selling to California despite its fear that it will not be paid.= =20 U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of= =20 irreparable harm if Reliant stopped selling power to the ISO, which buys at= =20 the last minute on behalf of utilities to bolster supplies and try to fend= =20 off blackouts.=20 Such blackouts struck the state twice this week, shutting off power to=20 hundreds of thousands of people from San Diego to Oregon, snarling traffic= =20 and shutting down businesses.=20 The state remained free of any power alerts Thursday morning, as power=20 reserves stayed above 7 percent.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= ,=20 Southern California Edison and Pacific Gas and Electric Co.=20 The judge said he had no authority to force the DWR to pay for that power.= =20 The utilities have been denied credit after amassing billions of dollars in= =20 debt paying high prices for power that the state's energy deregulation law= =20 prevents them from passing on to consumers.=20 Gov. Gray Davis has said the state isn't responsible for purchasing the=20 costly last-minute power the ISO buys for Edison and PG&E, despite a law=20 authorizing state power purchases on the utilities' behalf.=20 ISO attorney Charles Robinson said the ruling gives ISO operators "a tool t= o=20 assist them in keeping the lights on in California."=20 "Had the decision gone the other way, one could expect other generators to= =20 simply ignore emergency orders," Robinson said.=20 Damrell's preliminary injunction will remain in effect until the Federal=20 Energy Regulatory Commission rules on the matter.=20 In another development Wednesday, state Controller Kathleen Connell=20 complained that the energy crunch is imperiling California's financial=20 health.=20 Connell said the state's power buying on behalf of Edison and PG&E is gutti= ng=20 its budget surplus. Since the state started making emergency power buys in= =20 January, the surplus has fallen from $8.5 billion to about $3.2 billion, sh= e=20 said.=20 Connell ordered an audit of the state's power buying, saying Davis is=20 withholding key financial information from her office and the Legislature.= =20 She is also refusing a request by Davis and the Legislature to transfer $5.= 6=20 billion into a "rainy day fund" she said was set up to impress Wall Street = as=20 the state prepares to issue $10 billion in revenue bonds to cover its power= =20 buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt, Connell said.=20 Sandy Harrison, spokesman for the state Department of Finance, and Keely=20 Bosler of the Legislative Analyst's Office, said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 Davis spokesman Steve Maviglio dismissed the criticism.=20 "Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency," he said.=20 Connell is a candidate for mayor of Los Angeles in next month's election.= =20 The ISO study, meanwhile, covered five major in-state power suppliers =01)= =20 Reliant, Dynegy, Williams/AES, Duke Energy and Mirant, as well as 16 power= =20 importers. All deliver power to customers of Edison, PG&E and San Diego Gas= &=20 Electric Co., the state's three largest investor-owned utilities.=20 "All overcharged, but some excessively and some by moderate amounts," said= =20 ISO's Sheffrin.=20 According to the report, the overcharging took place beginning last May, wh= en=20 the energy crisis began, and continued through last month.=20 During that time, according to the report, energy suppliers commonly offere= d=20 their electricity at twice the amount it cost them to produce.=20 FERC member William L. Massey said he wasn't shocked to hear the amount=20 overcharged added up to more than $5 billion.=20 "Prices over the past 10 months in California have greatly exceeded the=20 federal standards of just and reasonable prices, and I think they have=20 exceeded the standards by possibly billions of dollars," he said.=20 Chuck Griffin, spokesman for Atlanta-based Mirant said the company would=20 justify their charges to FERC officials.=20 "I think we're missing sometimes just how basic the problem is in Californi= a.=20 Supply and demand are out of whack and some basic rules of economics kick i= n=20 when that happens," he said.=20 ---------------------------------------------------------------------------= --- ------------- Disappearing state surplus sparks alarm=20 Controller puts hold on transfer of $5.6 billion to reserve funds By Karen Kucher and Ed Mendel=20 UNION-TRIBUNE STAFF WRITERS=20 March 22, 2001=20 The state's general fund surplus has dropped to $3.2 billion from $8.5=20 billion since January largely because California's power purchases are=20 devouring the money, state controller Kathleen Connell said yesterday.=20 Connell said she wants to see more documentation about state power spending= =20 before approving the transfer of $5.6 billion from the general fund to a=20 special reserve fund requested by Gov. Gray Davis.=20 Connell said the state would have to borrow $2.4 billion to cover the=20 transfer.=20 Report says power wholesalers overcharged California $5.5 billion=20 Outages darken economic outlook in state, some say=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 "We started this year with a generous budget surplus. The energy crisis has= =20 taken much of that away, and this transfer on top of the electricity=20 purchases would put the (general) fund at risk," Connell said in a statemen= t.=20 Her action came on a day when state power supplies improved. After two days= =20 of forced outages this week, no rolling blackouts were ordered yesterday.= =20 Several power plants came back on line and imports from the Pacific Northwe= st=20 provided enough electricity to meet demand yesterday, said Stephanie=20 McCorkle, a spokeswoman with the California Independent System Operator,=20 which manages most of the state's power grid.=20 "Gradually more (electricity) generation comes on every day," McCorkle said= .=20 "By Monday, we should see somewhere around 2,200 megawatts back in service= =20 that was not on this Monday. That's if no other generation falls off."=20 Meanwhile, Connell's move took some by surprise.=20 A spokesman for the state Department of Finance said Connell is denying a= =20 routine transfer that is required by law. "It was just a routine accounting= =20 measure that we didn't anticipate becoming controversial," Sandy Harrison= =20 said.=20 Connell announced the denial of the transfer a day after Davis endorsed one= =20 of her opponents, former Assembly Speaker Antonio Villaraigosa, in the race= =20 for Los Angeles mayor.=20 Connell, who monitors California's cash flow, said she was "deeply concerne= d=20 about putting the state's general fund in a deficit situation in light of t= he=20 energy crisis."=20 About two months ago, the state began spending about $50 million a day to b= uy=20 power after Pacific Gas and Electric and Southern California Edison nearly= =20 went bankrupt. It is also purchasing power for customers of San Diego Gas a= nd=20 Electric.=20 The Davis administration said earlier this week it soon will begin spending= =20 an additional $500 million on power purchases, bringing the total to $4.2= =20 billion.=20 As that staggering sum continues to grow, the state won a court battle with= =20 an electricity supplier yesterday. A federal judge in Sacramento sided with= =20 the state and ordered the wholesaler to continue selling to California=20 despite its fear that it will not get paid.=20 Judge Frank C. Damrell Jr. said Californians were at risk of irreparable ha= rm=20 if Reliant Energy Services stopped selling power to the Independent System= =20 Operator. The ISO acquires last-minute power on behalf of utilities to fill= =20 gaps in supply to try to fend off blackouts.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= .=20 The judge said he had no authority to force the DWR to pay for the power.= =20 Davis has said the state isn't responsible for purchasing the costly=20 last-minute power the ISO buys for Edison and PG&E, despite a law authorizi= ng=20 state power purchases on the utilities' behalf.=20 Meanwhile, those who manage the power grid say the forecast for power=20 supplies this week looks good, although conditions can change quickly.=20 ISO managers continue to stress the importance of conservation. Utility=20 customers across the state conserved about 900 megawatts of power Tuesday,= =20 which kept blackouts from being ordered that night.=20 As the power crisis worsened this week, ISO managers wished aloud that they= =20 still could rely on business customers to shut down in exchange for lower= =20 energy rates.=20 Such "interruptible" customers saved as much as 2,100 megawatts last spring= ,=20 a figure that dropped to about 1,700 last summer and 1,400 at the end of th= e=20 year. But in January, the state Public Utilities Commission told utilities= =20 they could no longer impose fines on business customers who refuse to shut= =20 down when asked.=20 ISO managers realize the program was harming businesses with frequent=20 interruptions of service -- but they still miss having that option, McCorkl= e=20 said.=20 "It would have made an enormous difference, but at the same time we=20 understand the impact it was having on businesses," McCorkle said. ---------------------------------------------------------------------------= --- -------------- Outages darken economic outlook in state, some say=20 By Dean Calbreath? UNION-TRIBUNE STAFF WRITER=20 March 22, 2001=20 Until this week, the San Diego Regional Chamber of Commerce was predicting= =20 that the county was well-insulated from the growing threat of economic=20 recession.=20 But that was before the lights went out in the chamber's downtown=20 headquarters Monday.=20 Working by window light in his darkened office, chamber economist Kelly=20 Cunningham rapidly erased his previous projections for 3.5 percent growth f= or=20 San Diego County. Cunningham now feels the local economy could fall into a= =20 recession thanks to its shaky supply of energy.=20 Report says power wholesalers overcharged California $5.5 billion=20 Disappearing state surplus sparks alarm=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 "Blackouts are very disruptive to the economy," Cunningham said. "A busines= s=20 can absorb rising energy prices by cutting costs or raising its own prices.= =20 But an energy shutoff is much less predictable. It cuts into productivity."= =20 Those sentiments are being echoed throughout California, as business leader= s=20 and economists worry that rolling blackouts will darken the state's=20 previously glowing economy.=20 At the University of California Los Angeles, for instance, leading financia= l=20 theorists will meet April 4 to discuss the question "Can California grow in= =20 the dark?" Although the topic was chosen before the recent string of power= =20 outages, the blackouts have given the issue new urgency.=20 "These blackouts are not just a single episode," said UCLA economist Tom=20 Lieser. "They are a bridge to what will happen this summer. If we don't fal= l=20 into a recession in the second half of the year, we will fall pretty close.= "=20 Tapan Munroe, an economist formerly with Pacific Gas and Electric, this wee= k=20 crossed out his projection for 2 percent statewide growth. After blackouts= =20 rolled toward his consulting offices in the Bay Area city of Moraga, Munroe= =20 decided the state will be lucky if it manages zero growth.=20 "I'm a pretty optimistic guy by nature, but this has been sobering," Munroe= =20 said. "On Tuesday, one restaurant alone in San Francisco lost $20,000.=20 Multiply that by all of the businesses that lost power in the state and=20 you've got a serious problem."=20 Two days of blackouts in San Diego County have hurt businesses large and=20 small. Among the industries under threat is the local biotechnology sector,= =20 which requires a steady supply of electricity to power areas of laboratorie= s=20 that must remain temperature-controlled and sterile.=20 Continued blackouts "could have a huge impact, not only in dollars, but=20 multiple millions of dollars," said Tom Oster, vice president of operations= =20 for BioCom, the leading trade organization for the more than 200 biotechs i= n=20 San Diego County.=20 Idun Pharmaceuticals, a biotech near La Jolla Village Drive that has 67=20 employees, had its power cut for about 40 minutes Tuesday. Though the compa= ny=20 has a back-up generator, some segments of its laboratories and lab equipmen= t=20 were not supported by it. Chemists also had to turn off some sensitive lab= =20 equipment to avoid the possibility of a damaging power surge once the=20 blackout was over.=20 "We're not in a position as a small company to back up the whole facility,"= =20 said Steven Mento, Idun's chief executive. "We haven't done a survey yet to= =20 determine whether we had losses, either in experiments or equipment damaged= =20 -- but we're hoping because the blackout was so short that damage will be= =20 minimal."=20 Mento said rolling blackouts, coupled with continuing high energy costs,=20 could cripple many small biotechs -- and even take a bite out of bigger, mo= re=20 established companies.=20 "We generate new compounds in controlled environments on a daily basis, and= =20 when power goes off you can lose samples because of contamination and other= =20 issues," Mento said. "We are fortunate that our losses would be in having t= o=20 repeat an experiment -- but this could be really critical for companies wit= h=20 drug manufacturing and issues of quality control."=20 The wireless firms along Sorrento Valley have not been immune from blackout= s.=20 The lights went out at Qualcomm early this week, although executives declin= ed=20 to comment about the impact.=20 No blackouts hit the big shipbuilding operations on the waterfront this wee= k.=20 But the National Steel and Shipbuilding Co. -- one of San Diego's largest= =20 employers -- already experienced a voluntary loss of power this year, its= =20 first since World War II. Since the shipyard does not have its own power=20 supply, NASSCO executives fear the effect of unplanned outages.=20 "Our average payroll totals half a million dollars a day," said NASSCO=20 spokesman Jim Scott. "When you have a day's work disrupted, that can be=20 pretty serious. We're currently in discussions about the possibility of=20 buying from independent power suppliers, or setting up a power plant of our= =20 own."=20 Small businesses, which constitute the bulk of employment in San Diego=20 County, were hurt by disruptions as well -- costing them vital revenue at a= =20 time when their power bills have skyrocketed.=20 At Fantastic Sam's, a hair salon in Chula Vista, Angelica Alcala estimated= =20 that business dropped 60 percent when the blackouts hit Tuesday. Among othe= r=20 things, Alcala had to alter her planned haircuts because she was relying on= =20 scissors instead of electric clippers.=20 At the Family Fun Center in El Cajon, the management gave vouchers or refun= ds=20 to the 15 or so video-game players who were in the midst of killing aliens = or=20 fighting ninja warr
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