California regulators order struggling utilities to keep power on

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California regulators order struggling utilities to keep power on Filed: 01/19/2001

By JENNIFER COLEMAN

Associated Press Writer

SACRAMENTO, Calif. (AP) — State regulators ordered two huge cash-strapped utilities to keep serving their customers Friday as California's energy crisis began to reverberate through the economy, threatening everything from milk supplies to gasoline deliveries. Lawmakers agreed to spend $400 million in a desperate bid to keep power flowing.

The Public Utilities Commission called an emergency meeting to block Southern California Edison and Pacific Gas and Electric Co. from taking action on their own to scale back service to any of their 10 million residential and business customers. The panel voted 2-1 for the order.

The state's two largest utilities are both on the brink of bankruptcy and have been blocked from the California Power Exchange unless they provide collateral, forcing them to look elsewhere for power.

The order assures the utilities "will not and may not abandon service to customers over the weekend," PUC Chairwoman Loretta Lynch said.

The Independent System Operator, keeper of the state's power grid, and the Electricity Oversight Board told the PUC earlier that the two utilities could begin reducing power output as early as Saturday.

PG&E, which serves much of Northern California, informed the state Electricity Oversight Board that beginning Saturday it would cease to purchase power from outside sources, instead depending on its own generation. That's not nearly enough to serve all its customers.

"All customers would be seriously jeopardized and irreparable harm could result," the PUC said in a written statement.

SoCal Edison and PG&E did not immediately respond to requests by The Associated Press for details and comment on the order.

The PUC's move came as Gov. Gray Davis prepared to sign hastily approved legislation to use $400 million in taxpayer money to purchase power on the open market and resell it to cash-strapped utilities. The Assembly approved it 70-0 and the Senate backed it 34-2 Thursday evening.

And U.S. Energy Secretary Bill Richardson, calling California's power supply "precarious," said Friday he was issuing an order to require companies to continue shipping natural gas into California to ensure adequate supplies.

The action was taken to ensure that the state's cash-strapped utilities will not be cut off by natural gas suppliers, Richardson said.

Richardson's order came as the keepers of California's power grid warned blackouts could occur again for a third day, despite the state's quick move to step in and buy emergency power.

"Nothing has changed to a great extent. The demand in Northern California is down slightly at this point, but we still need people to conserve," said the ISO's Patrick Dorinson.

Despite the overwhelming vote for the emergency bill, some lawmakers called it one of the worst pieces of legislation they had ever seen.

"This is a Band-Aid we're going to put on a bleeding body," Assemblywoman Sarah Reyes, D-Fresno, said before voting in favor.

The Legislature's action is only a stopgap expected to tide the state's energy-starved utilities over for a few weeks while legislators seek a more permanent solution.

But with the state's energy crisis triggering ISO-ordered rolling blackouts that affected millions of people on Wednesday and Thursday, legislators said they had little choice.

PG&E filed a doomsday plan earlier this month with the PUC outlining what would happen if the financially struggling utility were cut off by power suppliers.

The plan, obtained by the San Jose Mercury News, says hospitals, fire stations and other emergency services would experience blackouts of up to three hours long, twice a day. All other areas would see blackouts of up to six hours, twice a day, the plan said.

Company officials called the plan a "worst-case scenario." As long as the state or the ISO can continue paying for PG&E's power, there would be no need to put the doomsday scenario into effect, said PG&E spokesman John Nelson.

"We're troubled by what goes on in our state and we can only see it getting worse," said Senate leader John Burton, D-San Francisco.

It got so bad Thursday that the Independent System Operator, which controls the state's power grid, ordered electricity turned off for as long as two hours to more than 675,000 homes and businesses from central California to the Oregon line.

With the state's power reserves hovering around 1.5 percent, the ISO had declared a Stage 3 power alert at 12:01 a.m. Thursday. That alert was extended until just before midnight Friday.

"This is the longest continuous Stage 3 alert in history," said Kellan Fluckiger, the ISO's chief operating officer.

It, and a similar alert and blackouts on Wednesday, were triggered by a confluence of events, including soaring natural gas prices, a shortage of hydroelectric power in the Pacific Northwest, delivery problems and an unusually high number of power plants being shut down for repairs and maintenance at the same time.

Ironically, the state's most populous area, Southern California, escaped the blackouts. That was in part because of quirks in the state's distribution system that causes power bottlenecks in the north, making it harder to deliver electricity there than to members of the power grid located in the south.

Los Angeles, meanwhile, has its own, separate system that has given the nation's second-largest city enough power that it has been able to sell some at low cost to the rest of the state during the crisis. It provided 300 to 700 megawatts an hour to the rest of California on Thursday.

The state also helped out, spending an estimated $6.2 million to buy power on Thursday, according to the state Department of Finance.

None of it was enough, though, to keep the ISO from shutting off power to hundreds of thousands of homes and businesses across a 500-mile swath of central and northern California.

The effects of that shutdown began to ripple through the economy.

Kinder Morgan Energy, one of the state's biggest pipeline companies, couldn't pipe gasoline from major California refineries to terminals around the state for 12 hours on Thursday, the third straight day it faced lengthy outages, said spokesman Larry Pierce.

The problems could soon lead to long gas lines and higher prices at the pump, said Bill Greehey, CEO of Valero Energy, which runs a 125,000-barrel-per-day Benicia refinery that produces about 10 percent of the state's gasoline supply.

"California is getting to the point where they are going to have a crisis that is a helluva lot bigger than the one it already has on its hands," he said.

Meanwhile, Silicon Valley businesses estimated that Wednesday's blackouts cost them tens of millions of dollars, and dairy farmers in California's Central Valley said they had to dump fresh milk into wastewater ponds because industrial creameries crippled by power outages couldn't process it.

All the while, the day-to-day lives of average people continued to be disrupted by the blackouts that lasted one to two hours at a time.

Traffic lights went out for a second day across the San Francisco Bay area, causing fender-benders in Palo Alto. Computer screens went dark, heaters and bank machines were silent and classrooms were plunged into darkness.

The outage in Sun City Lincoln Hills, a retirement community near Sacramento, prompted Jim Datzman, 62, and his wife, Sandy, 59, to take their twin grandsons to a community playground. Corbin and Quinn, 2, were watching Barney on television when the power went out.

With no end to the crisis in sight, Californians began stocking up on flashlights, candles and firewood. Stores were swamped with calls from businesses looking for generators.

The exact number of customers affected was difficult to determine. The ISO said the amount of megawatts taken out were enough to serve 1.5 million homes and businesses.

But PG&E, which accounts for about 80 percent of the blacked-out customers, said it cut power to 675,000 residential and business customers. Municipal utilities and irrigation districts also had outages.

http://www.bakersfield.com/oil/Story/278043p-259434c.html

-- Martin Thompson (mthom1927@aol.com), January 19, 2001


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