Northern Calif. Endures Blackout Alerts

S A C R A M E N T O, Calif., Jan. 22 -- As California faced the threat of yet more rolling blackouts, state officials were working on a long-term plan to rescue Pacific Gas and Electric Co. and Southern California Edison from bankruptcy, while trying to spare consumers the financial burden.

The move came after a tough week for Northern California residents who endured temporary blackouts Sunday as the state's electricity reserves plummeted to dangerous levels. Power officials extended the weekend's Stage 3 alert as reserves approached 1 1/2 percent.

The rolling blackouts are predicted to continue.

The crisis has been driven largely by soaring wholesale energy prices in recent months. Electricity retailers have been unable pass on the increased cost to consumers because of a price freeze imposed by the power deregulation.

The energy crisis cost the state $1.7 billion last week alone. The utilities are now $12 billion in debt, and the two biggest companies are reportedly contemplating filing for bankruptcy.

"Bankruptcy would be a good thing for the utilities," said University of California business professor Peter Navarro. "It would shield them from their creditors, it would allow them to manage their cash flow."

Their financial crisis has made electricity generators increasingly wary of selling the state more energy.

In addition, several small power suppliers that provide a totalof about 500 megawatts of electricity to Southern California Edisonserved notice they will suspend service. A law firm representingthe Qualified Facilities said in a press release that the company'sfailure to honor its contractual obligations may cause "seriousfinancial injury" to the suppliers.

Southern California, which is home to most of the state's population, has been largely spared from blackouts because of the layout of the state's power grid and because Los Angeles uses its own power sources to serve its 4 million residents.

Enough Power for One or Two Weeks

State officials found a stopgap solution to the blackout problem Friday, when Gov. Gray Davis signed emergency legislation allocating $400 million in state funds to buypower and provide it to cash-strapped utilities.