Power Loans to Calif. Utilities Nearing an End

W A S H I N G T O N, Feb. 5, 2001 -- Standing by his word, the president willallow a federal order to expire Tuesday that required wholesaleelectricity companies to sell to California's cash-strappedutilities, Bush's spokesman said.

The agency that manages California's troubled power grid wassurveying major suppliers to see what power they will haveavailable on the wholesale market when the order ends, aspokeswoman for the agency said.

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

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

But even as Gov. Gray Davis and state lawmakers celebrated theagreement, the state remained under a power emergency withelectricity supply margins so small during the weekend and intotoday that sporadic blackouts were possible.

Questions Over Power Alternatives

Officials at the California Independent System Operator, theagency that manages the state's electricity market, were uncertainwhether they would have enough power after the federal directiveexpires Tuesday.

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

In mid-December, the Clinton administration declared an energyemergency in California and directed that suppliers continue tosell to the state's nearly broke utilities — Southern CaliforniaEdison and Pacific Gas & Electric — even though for some time theyhad been unable to pay for their purchases, amassing debts that nowhave reached $12.8 billion.

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

Fleischer noted today the directive has been sharply criticizedby utilities and officials in other Western states who worry aboutelectricity shortages of their own.

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

Grumbling Over Federal Order

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

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

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

"We're encouraged by the recent progress in California," saidWheatley. "But the credit worthiness of SoCal and PG&E and theirability to pay for past power purchases remains very much inquestion."

Pressed on whether Reliant would continue to sell to theutilities, Wheatley said, "We're going to continue to sell powerto creditworthy buyers."

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

California Power Woes the Nation

Meanwhile, the chairman of a House Commerce subcommittee onenergy became the latest in a slew of Republican lawmakers who havechided California for not building power plants and expecting lowpower rates.

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

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

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