Talks Held to Find Power Crisis Cure
W A S H I N G T O N, Dec. 19, 2000 -- A power crunch that has left Californiateetering on the brink of darkness and sent electricity pricesskyrocketing requires a swift, regional response, Energy SecretaryBill Richardson told an “energy summit” today.
“We are now facing a situation that requires immediateaction,” he said. “I ask you, everyone in this room, to get downto work, roll up your sleeves and come up with a solution thateveryone can live with.”
Richardson left the meeting at the Federal Energy RegulatoryCommission to fly to Denver, where Western governors were to meetWednesday to discuss the situation. Richardson said he favors aregional price cap for power to encourage more companies to providepower to California.
Who’s Going to Pay?Richardson issued an emergency order last week forcing 75Western power generators to supply electricity to California. Thegenerators had been reluctant to supply power because they areconcerned about receiving payment from California’s two largestutilities, both of which are in financial trouble.
Those utilities — Pacific Gas & Electric and Southern CaliforniaEdison — are negotiating privately with the administration of Gov.Gray Davis to avoid swallowing $8 billion in debt from payingmarket prices for electricity while being forced to chargecustomers regulated prices.
“We are focused on finding a comprehensive solution,” PacificGas & Electric’s spokesman Ron Low said Monday.
Consumers may have to pay more as a result of these talks inWashington and California, but watchdog groups have been left outof the meetings.
“We’re furious,” said Mindy Spatt, spokeswoman for The UtilityReform Network, a San Francisco-based consumer advocacy group.“They’re negotiating again without us, and we’re the ones expectedto pick up the bill.”
The Great Rate Debate
Last week, to address power shortages and prices that havetripled for some consumers, federal regulators ordered an overhaulof California’s electricity industry. It set a “soft” price capon wholesale rates in the state and let California utilities keepthe power they produce rather than sell it on the open market, asrequired under the state’s 1996 deregulation law.
The regulators also urged industry officials to work out detailsthat would allow long-term contracts between power producers andelectric utilities. Those details were being discussed at the powersummit.
Long-term contracts, under which prices would be locked in forup to 30 years, would change the utilities’ current practice ofbuying power at the last minute, which drives up prices in badweather or when power plants are taken down for repairs. Consumers’bills would be higher on average, but they would be protected fromthe sudden price increases.
Spat Over ‘Spot Market’
PG&E and Southern California Edison embrace such contracts as away to avoid the “spot market,” which fluctuates withsummer heat and winter cold.
“I think everyone has reached the conclusion that reliance onthe spot market, with all of its problems right now, is somethingto be minimized,” said Gloria Quinn, spokeswoman for SoCal Edison.
Suppliers such as Dynegy Inc., a Houston-based company thatgenerates 2,700 megawatts of electricity in Southern California,like the idea of contracts because it would provide reliable buyersfor electricity to justify construction of new power plants.
“Right now we’re at the mercy of weather, demand, a number ofdifferent factors out there,” said Lynn Lednicky, Dynegy seniorvice president.
But consumer groups worry utilities and generators could set upcontracts that are too expensive, forcing higher bills ontocustomers, especially if regulators don’t double-check thetransactions.
“It’s easy for the group to sit around the table and come to aconclusion because they won’t pay for it,” said Harry Snyder,senior advocate for Consumers Union. “This is a horriblesituation.”