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Hot, Dark Summer Ahead for California

By Peter Behr and William Booth Washington Post Staff Writers Thursday, February 1, 2001 ; Page E01

California faces a serious risk of greater electricity crisis this summer with bigger, more frequent blackouts because of a severe drought in the Pacific Northwest that is draining hydroelectric power resources, energy analysts and company officials told a Senate committee yesterday.

The power shortage will mean continued high electricity prices in states bordering California.

"You have to scramble right now because we have a looming crisis again this summer," consultant Larry Makovich of Cambridge Energy Research Associates told the Senate Energy and Natural Resources Committee,

Senators and witnesses at yesterday's hearing debated the possibility of federally imposed price caps or rate controls that Northwest governors have requested to rein in extraordinarily high wholesale electricity prices.

The proposals are expected to be a main focus of a meeting between western governors and Bush administration officials Friday. But so far there is no indication that Congress would move rapidly on that front and the Federal Energy Regulatory Commission has resisted imposing wholesale price caps in California.

In the "worst case," if the region's drought continues and summer electricity demand is very high because of hot weather, California could face more than 1,000 hours of blackouts this year, said Joe Bob Perkins, president of wholesale operations for Reliant Energy, a Houston-based company that owns major power plants in California.

"Essentially, California will have to be incredibly fortunate" to avoid blackouts this summer, he said.

Members of the Senate committee agreed.

"We're going to be in a crisis situation this summer as well," said Sen. Frank Murkowski (R-Alaska), the committee chairman.

Sen. Dianne Feinstein (D-Calif.) said she believes that California will be short between 2,000 and 5,000 megawatts of power a day when heavy air conditioning use goes up in hot weather. A megawatt of power provides electricity to 1,000 homes.

In the summer, California's electricity demand rises to a peak of 50,000 megawatts a day, exceeding the state's maximum generating capacity of around 45,000, according to state officials.

Imports make up the rest. Electricity from the Pacific Northwest -- most of it hydroelectric power -- contributes as much as 11 percent of California's power needs in a normal year.

Recent blackouts in the state were caused by shortages of 500 megawatts, affecting 500,000 California households. If the worst-case scenarios come true, and shortages reach 5,000 megawatts, blackouts could last six hours at a time, affecting more than 20 million people, Perkins said.

A drought in the Pacific Northwest is compounding California's electricity shortages and the failure of its four-year-old deregulation program.

The Columbia River and Snake River regions are facing the fourth driest year on record, said Sen. Gordon H. Smith (R-Ore.).

The reservoir behind the Grand Coulee Dam, largest in the Northwest, is at its lowest level in 25 years, and water power from Columbia River dams that normally would be used this summer is being tapped now to help California through its current shortage, Smith noted.

The Northwest Power Planning Council recently warned that the Northwest faces a 1-in-4 chance of power shortages.

"There is a very high probability that the West Coast will face blackouts," said Judi Johansen, executive vice president of PacifiCorp, an electricity utility serving six western states.

Panelists at yesterday's Senate hearing agreed that California has few immediate options available to deal with continuing shortages this year. Although six power plants are under construction, most will not come on line until 2002.

The state should consider paying big industrial users to close their plants and use electricity they have contracted to receive, panelists said. Conservation by companies and residents could save an additional 600 megawatts a day, by one estimate. But the current prices paid by Californians, capped at roughly 1996 levels, don't give people an incentive to reduce electricity use, panelists said.

Price caps won't prompt increased production from generators that are paying record prices for the natural gas used to make electricity, generating companies executives said. "You can start turning the power off, or pay the price it takes to get power to come," said Steven J. Kean, Enron Corp.'s chief of staff.

In Sacramento yesterday, Gov. Gray Davis (D) said officials are close to completing the first piece of legislation to allow the state government to enter into long-term contracts with power suppliers. The state government has been buying power on an emergency basis, but the pending legislation would make the state a major electricity buyer for years to come. That would, in effect, end California's failed experiment with deregulation.

The legislative action in Sacramento followed the release of a second state-ordered audit of one of California's struggling utility companies. The review of Pacific Gas & Electric's books showed that the company ignored warnings that its costs for wholesale electricity would soar under deregulation and that it failed to put cash aside to keep the company solvent.

"PG&E did not anticipate it would be constrained in its borrowings and did not develop a cash conservation program until December 2000," the audit report said.

The audit also confirmed that Pacific Gas & Electric is deeply in debt and nearly broke, just as an audit the day before concluded about Southern California Edison.

Like Southern California Edison, Pacific Gas & Electric had transferred about $4.7 billion to its holding company, PG&E Corp., since 1997. The money was, in part, from the sale of its power generating facilities and some of it was used to pay debt.

Such a transfer is not illegal or improper, but it has outraged consumer advocates and some elected officials in California.Booth reported from Los Angeles.

2001 The Washington Post

-- Martin Thompson (, February 01, 2001


Here we go again, the socialist mantra, "California's failed experiment with deregulation". For those who do not know the meaning of the word, my dictionary defines it as - free from regulation (esp. government). That is clearly not what happened. Not only are the utilities still under the control of state and federal "public utility commissions", they have to pay more for energy than they can sell it for. Some deregulation!

-- Warren Ketler (, February 01, 2001.

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