Progress in Calif. Power Crisis

The major figures in California’s power crisis agreed to work to try to bring stability to the state’s electricity system, but six hours of discussions Tuesday produced no solutions.

“Progress was made. All sides gave a bit,” Energy Secretary Bill Richardson told reporters after the talks broke up shortly after midnight.

California Gov. Gray Davis also expressed optimism. “We can see light at the end of the tunnel,” he said.

Stability vs Bankruptcy

High-level administration officials and all the major figures in the California electricity wars met behind closed doors for seven hours to try to fashion a framework for resolving the problems facing the state’s electricity supply system.

The parties agreed to technical meetings today and to have all the principles meet again this weekend — a sign that some agreement were fashioned during the marathon discussions Tuesday at the Treasury Department.

“The participants agreed on the need for cooperation to maintain stability and avoid bankruptcy of California utilities,” a statement issued by the participants said.

Holding Prices Down... Maybe

Davis, who has accused electricity wholesalers of price gouging, said that progress was made in working out agreement on long-term contracts to hold prices down, but he gave no further details.

The private meeting brought together state officials, regulators and legislative leaders; the state’s three largest electric utilities; nine of the major power producers and brokers; and the chairman of the Federal Energy Regulatory Commission, which has refused to impose wholesale price controls sought by Davis.

In addition to Richardson, also at the meeting were Treasury Secretary Lawrence Summers and Gene Sperling, the president’s top economic adviser.

Before the session began, Sperling said the administration hoped to play “an honest broker role” and for the first time bring the parties together to possibly develop a framework for resolving California’s energy problems.

“We have very little direct authority over any of the parties,” Sperling told The Associated Press.

Bailout Unlikely for 'Colossal Failure'

Federal options appeared to be few, and one key Republican senator already has warned against a bailout for the state, whose five-year experiment with electricity deregulation was described this week by Davis as a “dangerous and colossal failure.”

The potential economic fallout from California’s power problems became more apparent Tuesday when Intel Corp., the world’s largest manufacturer of computer chips, announced it would no longer expand its plants or build new ones in the state until the electricity problems — including sporadic threats of rolling blackouts and soaring prices — are resolved.

“Unless this energy issue is addressed ... it won’t be just an issue of whether employers expand their operations here. It will be an issue of whether they continue to build their products here,” warned Carl Guardino, president of the Silicon Valley Manufacturing Association, representing 190 California technology companies.

The session was widely viewed as an attempt by Davis to enlist administration help in calming concerns on Wall Street and among the banking community over threats to the solvency of the California utilities.

Caught in a Trap?

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