Northern Calif. Endures Blackout Alerts
S A C R A M E N T O, Calif., Jan. 22, 2001 -- 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.
At current wholesale prices, that money was expected to last only a week ortwo.
Meanwhile, State Controller Kathleen Connell announced a plan that would place leins upon the assets of Pacific Gas & Electric and and Southern California Edison if they fail to repay the state the millions of dollars needed to buy power of their behalf.
Connell said the proposal, expected to be introduced in the state Legislature later today, will help protect taxpayers if the utilities go bankrupt.
"As we start signing checks here, let's make sure we knowwho is going to repay and who isn't," Connell told a newsconference.
Assembling Legislative Plans
The state Legislature prepared to introduce new proposals today that would allow utilities to pass their huge debts on to customersin exchange for giving up their hydroelectric plants.
One proposal, to be introduced by Assembly Speaker Robert Hertzberg(D-Van Nuys), and Assemblyman Fred Keeley (D-Boulder Creek), wouldmake the state one of the largest owners of hydroelectric power inthe nation.
Among the issues of the plan, still being discussed, would be
Enabling the state to enter into long-term contracts to buy electricity on the wholesale market, thus making up the difference between what the Investor Owned Utilities (IOUs) provide and what the state needs;
Issue revenue bonds to protect taxpayers from the costs of financing power purchasing;
Take over (in part or in full) the ownership of the IOUs' hydroelectric facilities.
Also being floated is a plan to create a "power czar" responsible for expediting the approval and construction of new power plants by summer, says Davis' press secretary Steve Maviglio.
PG&E spokesman John Nelson said time was running out.
"It is a matter of days, and at most weeks, before utilitiesrun out of cash altogether," Nelson said.
The proposals come in the wake of opposition toward rate hikes by consumer groups. A petition signed by more than 5,000 residents who say they will refuse to pay higher bills for a bailout of the utilities was delivered to Davis today by several consumer groups including the Global Exchange, The Utility Reform Network and the Green Party.
The groups are also organizing a march in San Francisco to PG&E's headquarters. They are upset by the 7 percent to 15 percent rate hikes recently imposed by the Public Utilities Commission, and the prospect of more hikes to come.
Affecting Everyone From Dairy Farmers to Gasoline Distributors
The Stage 3 alerts were accompanied by urgent requests for Californians to conserve energy.
The effects of the energy crisis continued to ripple through the economy last week as power problems shut down the state's main gasoline pipeline.
The possibility that closure could soon affect prices at the gas pump worried some professional drivers, like Dragi Popovski in Burbank.
"All the prices of everything goes up and the salaries still stay the same which is not very good for us," said Popovski.
The shutdown also took a toll on many dairy farmers, because their plants were running fewer hours and didn't have the power to store their milk.
"The system backs up, but the cows have to be milked. So if you have to go on to the next milking you have to discard the milk that's already there to keep going," said Case Van Steyn, a Sacramento dairy farmer.
ABCNEWS' David Wright, Daria Albinger, and The Associated Press contributed to this report.