Calif. Facing Natural Gas Shortage

A federal court ordered power suppliers to keep electricity flowing for at least another week, but now California authorities are scrambling to deal with possible natural gas shortages.

Pacific Gas and Electric announced that customers in northern and central regions could see shortages by next week if a cold snap moves in.

PG&E said its problems have been compounded because a federal court order that guaranteed gas deliveries expired Tuesday.

After the judge's ruling requiring the power companies to keep electricity flowing at least until Feb. 16, when the next hearing is held, Gov. Gray Davis unveiled a plan that he said would add enough electricity to power 5 million more homes by summer.

"We will demonstrate that California can cut red tape, build more power and protect the environment," Davis said at a news conference in Yuba City, where a new 545-megawatt plant is expected to be operating by July.

State air-quality regulators said they would grant exemptions to ease concerns of two of the suppliers who argued they could be fined for violating pollution standards if they continued meeting California's demand.

The third supplier, Houston-based Reliant Energy Services Inc., said it feared the state's two big cash-strapped utilities would never pay for the power it was supplying.

Alternatives to Bankruptcy

Southern California Edison and PG&E have said they are nearly $13 billion in debt, but State Treasurer Philip Angelides said Thursday that he doesn't believe they will have to declare bankruptcy.

Lawmakers are discussing enough financial options, including buying a stake in the utilities or taking over their transmission lines, that should enable the companies to pay their bills, Angelides said.

"The next step is up to them," he said, adding that even if they did file for bankruptcy, they still could continue operating.

Reliant wants the state to guarantee Edison's and PG&E's power purchases, but Davis has balked at that, saying Reliant could try to drive up the price. Last week, Davis signed a law allowing the state to negotiate long-term power contracts that would have it spending some $10 billion to provide power to the utilities' nearly 9 million customers.

The governor's latest plan is designed to add 5,000 megawatts — enough to power 5 million homes — to California's power grid by summer by cutting down on paperwork and streamlining the approval process for small natural gas or renewable-fuel power plants that would run only during peak hours. Plants online by summer would be eligible for $30 million in bonuses.

Davis asked President Bush to direct federal agencies to issue permits for small plants within the same time frame. The White House said it is reviewing the request.

California's energy crisis, which led to rolling blackouts twice last month, has been blamed on limited hydroelectric supplies, transmission problems, aging power plants, and the state's 1996 deregulation law, which prohibited utilities from passing wholesale costs on to consumers. A federal hearing is scheduled Monday on Edison's request that it be allowed to pass on those costs; PG&E has filed a similar lawsuit.