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Calif. scrambles for answers to power crisis Mark J. Terrill, AP

SACRAMENTO, Calif. (AP) — Faced with a deepening electricity crisis, state officials are weighing some drastic proposals, ranging from a public takeover of the entire network to a crash construction program for new power plants. The state's two largest utilities are already $9 billion in debt and are losing an estimated $40 million each day because of wholesale price spikes. Both have said they'll face bankruptcy in a matter of weeks if nothing is done.

''At its core, you're looking at a catastrophic power shortage. That means you either ration by high prices or you ration by rolling blackouts. There is no third choice,'' said Republican state Sen. Tom McClintock.

Others disagree that a power shortage is the root problem, some blame the state's recent power deregulation and high wholesale costs, but most concur that time is running out for the utilities to remain solvent.

The Public Utilities Commission on Thursday approved rate increases of 7 to 15% for Pacific Gas and Electric Co. and Southern California Edison Co. But the utilities, which serve 25 million people, said the increases weren't enough. Wall Street agreed, and the major credit rating agencies sharply downgraded both utilities.

The focus on solutions has turned to Gov. Gray Davis and the Legislature.

The governor is ''considering all the options,'' said Davis spokesman Steve Maviglio. Davis is expected to discuss his proposals in his State of the State speech Monday, but administration officials say he will likely focus on conservation and financial incentives for power plant builders rather than price controls, re-regulation or public ownership of the grid.

The more dramatic proposals are coming from the Legislature.

McClintock favors spending $5 billion of the state's surplus on rebates to consumers, but that proposal has drawn little support.

Democratic Assemblyman Fred Keeley has suggested spending $3 billion to buy hydroelectric power plants, then operate them under contract with the utilities. It would let the utilities get cheap power and avoid high wholesale prices on the open market, he said.

State Treasurer Phil Angelides has proposed a $10 billion plan to create a state agency to build and run power plants, own the distribution lines and use the power of eminent domain to seize plants in an emergency. However Republicans view Angelides with suspicion and Democrats don't have the necessary two-thirds majority to approve money for such proposals.

Since late spring, PG&E and SoCal Edison have lost more than $9 billion because of soaring prices for wholesale electricity and a state-imposed rate freeze that prevents them from passing the costs on to customers. That, in turn, affects their ability to borrow money to buy power to avert blackouts.

Wholesale prices have risen because of increased demand during the hot summer and cool winter and, some state officials say, because of profiteering on the part of wholesalers.

At the same time, the state's electricity reserves are stressed. A large number of power plants are down for maintenance, and imports are tight because nearby states are competing for power.

Nine new major power plants are licensed in California, but the first two won't go into operation for another year

http://www.usatoday.com/news/ndssat01.htm

-- Martin Thompson (mthom1927@aol.com), January 07, 2001