Jan. 24, 2001: Energy Crisis in Calif.

"Nightline" explores California's increased blackouts and taxed electric grid.
7:59 | 01/24/12

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Transcript for Jan. 24, 2001: Energy Crisis in Calif.
Not that long ago it would have seemed like a bad joke but the folks who control the flow of power into and around the state of California aren't kidney. They would like Californians to watch the Super Bowl next Sunday in large groups. Yes things are just that that. They're trying to reduce the number of television sets in -- next Sunday because. The supply of electricity in California is so vulnerable to any increase in demand. That too many folks watching the Super Bowl alone and using that many more electrical appliances at halftime even that could over -- the system. It has already reached the point that some California students are going to school wearing extra sweaters and carrying blankets while teachers -- out flashlights. The Miller Brewing Co. -- scale back production at one California plant. And -- the rest of its operation to breweries in other states Intel has threatened not to build any new plants in California. Yesterday President Bush issued an order requiring out of state electricity and natural gas companies. To continue supplying California utilities even though those utilities a near bankruptcy. But it's only a two week extension and the implication is that there won't be anymore. What's going on here and how likely is -- that what's happening in California will spread to the rest of the country. We Begin with this report from California -- from Nightline correspondent. Dave -- The idea of playing elevator -- -- may sound funny but -- moving without. -- Where were you when the lights went out. In your car when all the traffic lights went down. In -- shop or at a big meeting in the office. The question has become all too familiar with thousands of customers of Pacific gas and electric PG and -- Who've been hit with rolling blackouts that have lasted up to two hours. At the magnolia pub and brewery in San Francisco's haight Ashbury district almost every customer has a lights out story. I had -- to continue to work. So I took my -- -- Government car and drove to Sonoma County. And was able to continue their. The magnolias proprietor David McClean worries about customers lost -- inconvenient. But he worries more that his business might not survive huge hikes in utility bills. Yes that's it actually a pretty big chunk of money for us because a utility bill as a relatively high percentage of our -- general expenses. So. Seeing them go up -- kind of upsetting because that's something we don't have any control over. This is a widespread worry especially of power consuming Silicon Valley. We're big employers like Intel are reportedly ready to ship jobs and development plans out of state. To escape the power crisis. Both the business development and the social development of California are likely to push power demands even higher. California because it's such. -- thriving economy he's been growing. The population we just saw with the census figures have grown by millions people are coming -- there's jobs there's high paid jobs. What's happening is of course that that growth is occurring in areas that have the highest energy consumption it's not just both percent but it's the nature of the growth. We're gonna need to have to build the necessary supplemental power to expand that -- The speaker of the California assembly Robert Hertzberg knows the future of his state is all hold. Until the supply -- demand crisis in energy who brought under control. Hertzberg also knows how the crisis started. The 1996. Legislature. Passed what it called. Deregulation. -- newly deregulated the only half evacuated. We said well we'll let that the host -- side of of the price float but we're gonna freeze the retail side. Protecting the retail rate -- it was good politics but there was a fatal flaw -- wholesale side. Competition was expected to send prices lower but it did. The California independent system operator. Which directs monitors all flows of power in and out of the state they could measure the real results. Capping retail prices encouraged -- limited use of power. While this growth and demand drove prices higher. This year starting around may and June that supply began to dwindle as the other states loads picked up. Dramatically. And we were experiencing low -- -- for the entire region. Prices kept going -- Last bay web wholesale prices suddenly doubled. They went higher than the cap retail products which meant for eight months utilities grew booked huge debt -- For the month of December for example we were forced to purchase on behalf of our customers at about forty cents per kilowatt hour. And were only able to charge customers about five cents per -- -- -- that's about eight times the size. Literature losing 35 cents for every kilowatt hour that you sell to retail customer that's exactly right in the month of December alone are shortfall was over one billion dollars. They would with a calculator could have predicted bankruptcy ahead and sure enough by the beginning of this year PG&E which serves separate Cisco -- much of northern California. And Southern California evidence of the State's other big privately owned utility we're starting to missed payments to their creditors. Tonight and declaring a state of emergency in California. Which led last Wednesday -- governor Gray Davis not only declaring an emergency. But -- 400 billion dollars deep into the state treasury to buy power. -- suppliers would no longer sell to the strapped utilities. And the 400 million is just a stop gap. Another billion in state finance purchases of power is currently under debate at the state legislature -- Finished the day ahead market yesterday. We were about 7660. -- megawatts short of the energy. That means that immediately after that we start shopping. Terry winter now -- California's daily search for power supplies. Every day for the past nine supplies have been so for them the -- declared a stage three alert. And on three of those days he had to resort to rolling blackouts to reduce demand to a level he -- -- Plus the market has worsened. With -- each day this -- which we could just past the prices have gone higher the katic atmosphere has gotten higher. And most importantly the utilities have come that much closer to the brink of bankruptcy. What's the state report right now. What's influx has certainly you know we're faced with a tremendous crisis in California you see the blackouts and what's happening in California -- -- our our focus in the near term. He is to try to stabilized. The market by engaging these long term contracts so that it takes the air out of this said. Having to go out and did every single day and the prices are ten times what -- But they should be. Two things about the state of California's long running crisis of energy supply and the -- Number one the time for finding -- solution seems to be just about off. And true going off seem to be the -- -- words to describe the price of that solution. I'm Dave marriage for Nightline in Sacramento.

This transcript has been automatically generated and may not be 100% accurate.

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