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California Likely Faces More Blackoutsby Myra P. SaefongCBS MarketWatch, January 18, 2001 |
Davis signs bills as creditors knock on utilities' doors
FOLSOM, Calif. (CBS.MW) -- California faces the threat of continuing rolling blackouts Friday as the state struggles to solve its intractable electricity crisis.
The state's power grid operator ordered rolling blackouts affecting as many as a million people Thursday, the second day in a row the state has run short of the power needed to keep homes lit and factories and businesses running.
The blackouts came just hours after Gov. Gray Davis issued emergency orders authorizing the state's Department of Water Resources to buy power in a bid to keep the lights on and stave off utility bankruptcies.
Late Thursday Davis signed two bills aimed at beginning to solve the crisis and said he hoped to get a third from the legislature appropriating millions of dollars to continue purchases on the spot wholesale market. See related story.
Meanwhile creditors of the state's two largest utilities were barely holding off forcing Edison International and PG&E Corp. into bankruptcy court. See related story.
Utilities were told by the state's power grid operator to cut 1,000 megawatts of load in the northern half of the state as of 9:45 a.m. PST. About 11,000 megawatts were offline due to planned and unplanned generation unit outages. A megawatt is enough electricity to power 1,000 homes.
The blackouts were necessary to keep the entire power system "stable," Kellan Fluckiger, chief operating officer at the California Independent System Operator said in a conference call.
The blackouts were primarily prompted by the loss of about 1,000 megawatts of supply from the Pacific Northwest because of transmission limitations, the ISO said.
Interruptible customers, those that agree to have their power cut off during emergencies like these in exchange for lower rates, suffered power outages Wednesday of nearly 18 hours, he said. Power to those customers had been off since about 5 a.m. Thursday, he said, and will likely remain off for the "bulk of the day."
Fluckiger believes that over the next week to 10 days, some "fairly significant number" of megawatts may be returned to service -- anywhere between 2,000 and 4,000 megawatts.
On Wednesday, customers were taken offline throughout the Pacific Gas & Electric utility service area, from the Oregon border south to Bakersfield. Outages were reported in the heart of Silicon Valley and San Jose as well as urban and suburban parts of the San Francisco Bay area.
The power authority, which manages most of the state's electric transmission system, narrowly avoided blackouts on Tuesday and last week, but the continuing financial crisis had made energy generators reluctant to sell into the state.
"All summer long we've been operating units at a tremendous load factor," Terry Winter, CEO and president of the Cal ISO said. More than 60 percent of the state's generating units are more than 30 years old. "When you run them that hard, they tend to break." Utilities normally use the winter months, when the load is down, to repair those units, he said.
State budgeting
The power shortage over the last few days and the imminent bankruptcy of PG&E and Edison pushed Davis to take the unprecedented step of ordering the state agency to use money from its current budget to buy power at the market rate.
That could cost the state hundreds of millions of dollars as it struggles to find energy on the spot market to make up for shortfalls in capacity.
The measure was expected to be a short-term solution to the power supply shortage problem and the governor said that it would be up to the California Legislature to buy power for a longer period. The state Senate is to vote on a bill Thursday that would allow the state to buy electricity from energy wholesalers and sell it back to utilities.
"The whole purpose of this is a bridge to a long-term solution," Davis said at a Wednesday evening news conference.
PG&E Corp. (PCG: news, msgs) and Edison International (EIX: news, msgs) have warned that they face bankruptcy unless they got relief from billions of dollars in debts they've run up buying electricity on the spot wholesale market. See related story.
PG&E's utility called Davis' actions "appropriate," but said that a stable supply of electricity through long-term contracts, as well as the return of the state's utilities to financial health was still needed to resolve the crisis.
Davis also asked the Legislature to pass a bill Thursday to avoid the utilities' bankruptcies. However, it wasn't clear if the legislation would "just provide a very near-term stop-gap or include a broader long-term solution," Steven Fleishman, an analyst at Merrill Lynch, said in a research note.
In either case, "there is now some hope again that bankruptcy can be avoided," he said. Fleishman maintains "neutral" ratings on PG&E and Edison because the market still needs "to see the viability of any legislation."
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