Court Orders Calif. Energy Supply To Continue

A judge tonight ordered a major electricity supplier to keep selling to California despite the expiration of a Bush administration order requiring it to do so.

Just hours before the directive's midnight deadline, U.S. District Judge Frank Damrell issued a temporary restraining order requiring Reliant Energy Services Inc. to continue selling power to the state. The order will remain in effect pending a hearing Wednesday afternoon.

The judge's action, issued to avoid "obvious, irreparable harm to the public," came after the keeper of the state's power grid sought restraining orders to force three major electricity suppliers to continue selling to California.

The other two, AES Pacific Inc. and Dynegy Power Corp., agreed to continue providing power at least until the Wednesday hearing and were not included in the court's order.

Scrambling for Power

At issue was enough electricity for roughly 4 million homes. "There are about 4,000 megawatts at stake here," said Stephanie McCorkle, spokeswoman for the Independent System Operator. "We have not gotten confirmation of their intentions come midnight, when the order expires. The outcome of this is going to give us a good indication of the risk of rolling blackouts tomorrow."

The U.S. Department of Energy's orders requiring power generators and natural gas producers to sell surplus supplies to California were due to expire at 12 a.m. PT. The orders, first issued in mid-December by the Clinton administration and extended by new Energy Secretary Spencer Abraham, will not be renewed, the Bush administration said.

That left the managers of California's stressed grid — in the fourth straight week under a Stage 3 power alert — wondering whether enough electricity would be available to avoid rolling blackouts. The ISO ordered scattered outages twice last month.

Adding to the scramble, the ISO predicted that on Wednesday it would only get about half the 8,000 megawatts it typically draws from the Pacific Northwest during California's morning and evening peak periods.

High demand and a short supply of water for hydroelectric power were blamed. One megawatt is enough power for about 1,000 homes.

Balking at Power Loan

Gov. Gray Davis called the ISO's request for temporary restraining orders "a tempest in a teapot."

"I think they are just using this imminent deadline as a way of getting our attention but believe me, we are working on those problems and we will get them resolved," Davis told CNN.

Reliant filed a lawsuit against the ISO last week in federal court in Washington, D.C., after receiving a letter the ISO sent to 140 generators asking them to confirm that they will continue to sell power to the state despite the expiration of the federal order.

Reliant's lawsuit contends the Houston-based company shouldn't have to bear the cost of California's energy crisis.

"Incredibly, the ISO's basis for demanding that Plaintiffs provide power … is the fact that the utilities ultimately receiving the power will not be able to pay for it," the lawsuit says.

Reliant spokesmen did not immediately respond to messages left Thursday afternoon at their offices in Houston and Washington by The Associated Press seeking comment.

Search for Long-Term Solution Continues

The ISO says Reliant and other suppliers signed agreements promising to send power to California in an emergency or the threat of one, such as today's Stage 3 alert, with power reserves threatening to fall to 1.5 percent.

Davis told CNN he was confident the state's new role as a major power buyer would keep the lights on.

The state has been spending $40 million to $50 million a day to keep the lights on despite the credit problems of the state's two largest utilities, Pacific Gas and Electric Co. and Southern California Edison.

PG&E and Edison together serve nearly 9 million residential and business customers.

Davis said today that the state Department of Water Resources reached agreements on the first long-term electricity contracts, expected to provide power to PG&E and Edison customers more cheaply than the day-to-day purchases on the spot market the state has been making since mid-January.

The initial contracts total about 5,000 megawatts — enough power for about 5 million homes — and range from three years to a decade, DWR power adviser David Freeman said.

He did not disclose the purchase price or the suppliers. Legislation signed by the governor last week lets the state spend an estimated $10 billion, raised through revenue bonds, on the power purchases.

Utilities' Credit Crippled

Wall Street was watching the action closely.

Standard & Poor's, a major credit rating agency, issued a statement chastising Davis, the Legislature and the PUC for not taking more aggressive steps to assure the utilities are able to pay their bills.

Power generators are reluctant to deal with the utilities until their debts are paid and suppliers have assurances that they will be paid for future energy deliveries.

The stocks of both utilities fell today. PG&E's shares declined 68 cents, or 5 percent, to close at $12.92 and Edison International's stock fell 40 cents, or 3 percent, to close at $12.83.

Meanwhile, PG&E officials were busy today trying to get commitments from suppliers to keep providing natural gas continuously.

"We're trying to get their trust," utility spokesman John Nelson said.

PG&E currently has a nine-day supply of natural gas in storage so there would be no immediate impact if providers cut off supplies as soon as the executive order expired, he said.

Nelson said a few suppliers have agreed to contracts guaranteeing they will be paid with money generated when PG&E's residential gas customers pay their bills. He declined to name those providers.

The PUC recently approved the payment plan at PG&E's request. Under its provisions, gas suppliers would be paid within 60 days.

Multi-Dimensional Crisis

California's energy scramble came as lawmakers and the governor continued looking for a way to help PG&E and Edison restore their financial health.

Senate leader John Burton said California should buy 26,000 miles of transmission lines — nearly two-thirds of the state's grid — owned by PG&E and Edison in return for helping the cash-strapped companies out of debt.

"If they expect to get money from the ratepayer, the ratepayers get something in return. I give you a dollar, I get a hot dog," said Burton, D-San Francisco.

California's electricity crisis is two-pronged.

First, PG&E and SoCal Edison say they have suffered $12.7 billion in losses from spiraling wholesale electricity costs that they have been unable to pass on to their customers because of rate limits imposed under California's 1996 deregulation law.

Second, the state's grid has been stressed by scant reserves, tight imports, high demand and power plants idled for maintenance or repairs. A speeded-up construction program is under way, but the first plant isn't expected to begin generating power until mid-summer.

California has been in a near-continuous Stage 3 emergency for more than three weeks.