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California Mulls Electricity Rate Freeze

Power Bills Have Doubled In San Diego This Summer Report Says Deregulated Power System 'Is Not Working' Rolling Blackouts Averted By Voluntary Cutbacks

FRESNO, California, August 3, 2000 CBS Power companies are struggling to meet extreme electricity demands.

(CBS) California's Public Utilities Commission will consider an electricity rate freeze on Thursday, following two days of voluntary cutbacks to avoid rolling blackouts.

With utility bills doubling in San Diego, a new report prepared by the state Public Utilities Commission said the deregulation scheme was flawed and warned of new increases in the cost of power.

Gov. Gray Davis said the report raised a number of questions and called for an investigation into "possible manipulation in the wholesale electricity marketplace."

An executive summary of the PUC report noted that the "Bay Area blackouts, the run-up in prices in the wholesale electricity markets and the rise in retail electricity prices in San Diego show that the system is not working for California."

"Because of serious market defects and a tight supply of electricity, purchasers of California power will likely pay billions more in electricity costs this year. Moreover, these price increases do not necessarily fund new investments in electricity supply or delivery reliability - they may flow solely to power producer profit margins," the study said.

Attorney General Bill Lockyer said Wednesday his office is examining price spikes in San Diego as part of a broad probe into deregulation.

Federal authorities are also examining California's power industry, and state lawmakers are likely to examine the issue next month.

Power companies across the western United States are scrambling to answer an electricity demand that has California perilously close to rolling blackouts, CBS News Correspondent John Blackstone reports.

Wednesday was the fifth day of scorching heat that is driving electricity demand to record levels.

The California Independent System Operator (CISO) declared the emergency and directed major utilities to interrupt the flow of power to certain industrial and business customers.

"We are now just getting to the point where, not only in California but in the western United States, there just isn't sufficient supply to meet the demand," said Terry Winter, CEO of CISO.

In northern Utah, utility officials were blaming air conditioner and computer use for a demand that was causing outages and blowing out substations Wednesday.

The energy crunch comes as California leads the nation in deregulating electrical utilities. Other states are following suit. The move was supposed to lower prices, but instead they've soared.

In San Diego, bills have doubled this summer, and the power crunch has deli owner Bill Tall raising prices and struggling to stay in business. He said his chances for survival are slim.

"You can't sell a deli sandwich for over $10 and have people come in," Tall said.

Some San Diego residents burned their electrical bills in a public demonstration Wednesday to protest the higher prices.

Other states are sending electricity to California to help, and it helps, but not enough.

The problem is the proliferation of high-tech tools like computers and the nation's dependence on air conditioning systems. All those gadgets create a need for electricity, but there are few new electrical generation plants, said Joan Goodman, an energy industry analyst.

"We only have half the supply that we need," she said. "There are plants that are going up, but not fast enough."

That could mean that the power problems California faces will occur elsewhere. In the meantime, officials in California are hoping that a break in the heat wave predicted by this weekend will cool down electricity demand as well.,1597,221065-412,00.shtml

-- Martin Thompson (, August 03, 2000

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