Power Loans to Calif. Utilities Nearing an End

Standing by his word, the president will allow a federal order to expire Tuesday that required wholesale electricity companies to sell to California's cash-strapped utilities, Bush's spokesman said.

The agency that manages California's troubled power grid was surveying major suppliers to see what power they will have available on the wholesale market when the order ends, a spokeswoman for the agency said.

Asked about the emergency directive that the Bush administration extended on Jan. 23, White House press secretary Ari Fleischer said today: "It shall expire tomorrow."

California lawmakers last week approved a $10 billion long-term plan to ease the state's power crunch. The state will sell bonds to buy electricity giving time for the state's two near-bankrupt private utilities to come up with their own recovery plan.

But even as Gov. Gray Davis and state lawmakers celebrated the agreement, the state remained under a power emergency with electricity supply margins so small during the weekend and into today that sporadic blackouts were possible.

Questions Over Power Alternatives

Officials at the California Independent System Operator, the agency that manages the state's electricity market, were uncertain whether they would have enough power after the federal directive expires Tuesday.

"We're not sure what the impact will be. We're talking to suppliers to see what their plans are," said Stephanie McCorkle, a spokeswoman for California ISO.

In mid-December, the Clinton administration declared an energy emergency in California and directed that suppliers continue to sell to the state's nearly broke utilities — Southern California Edison and Pacific Gas & Electric — even though for some time they had been unable to pay for their purchases, amassing debts that now have reached $12.8 billion.

Two weeks ago, President Bush extended the order, but made clear through spokesmen and his energy secretary, Spencer Abraham, that the power order would not be prolonged further.

Fleischer noted today the directive has been sharply criticized by utilities and officials in other Western states who worry about electricity shortages of their own.

The order "has implications for the region as a whole," said Fleischer.

Grumbling Over Federal Order

Among those most critical of the federal directive have been utility and government officials in the Northwest, where electricity prices have soared because of the tight wholesale market caused by California's demands. In Tacoma, Wash., the utility recently imposed a 50 percent rate hike for its customers to try to pay for higher wholesale costs.

Major suppliers of power were not committing themselves one way or the other.

"I don't know what we will do," said Richard Wheatley, a spokesman for Houston-based Reliant Energy, a major wholesale supplier with five generating plants in California.

"We're encouraged by the recent progress in California," said Wheatley. "But the credit worthiness of SoCal and PG&E and their ability to pay for past power purchases remains very much in question."

Pressed on whether Reliant would continue to sell to the utilities, Wheatley said, "We're going to continue to sell power to creditworthy buyers."

Reliant filed a lawsuit last week, challenging a directive from the California ISO that demanded power suppliers confirm they planned to continue selling electricity in the California market. Reliant argues in the suit, which has yet to be heard, that the power agency lacks authority to make such a demand.

California Power Woes the Nation

Meanwhile, the chairman of a House Commerce subcommittee on energy became the latest in a slew of Republican lawmakers who have chided California for not building power plants and expecting low power rates.

"We want to work with California, but California has to work with the rest of the country," said Rep. Joe Barton, R-Texas, during a speech at a conference of the American Public Power Association.

He said California officials have "an obligation" to review environmental restrictions that inhibit power production, construction of new power plants and transmission lines. Like Bush, Barton rejected federal controls on wholesale prices, arguing that price regulation would lead to greater shortages.

The APPA, which represents public power agencies around the country including large ones in the Northwest and in California, passed a resolution calling for the federal government to temporarily regulate wholesale prices until California's power market problems are resolved.