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Power Shortage Called Critical by Wire Reports The Oregonian, December 20, 2000

Energy Secretary Bill Richardson warns of layoffs
and more electricity cuts if California's crisis isn't solved soon

WASHINGTON -- Thousands of utility workers may be laid off and consumers could face more power shortages if a solution to California's electricity crisis isn't found quickly, U.S. Energy Secretary Bill Richardson said Tuesday.

PG&E Corp. and Edison International, the owners of California's two biggest utilities, have warned they could run out of money to buy power if wholesale electricity prices stay high. The companies say they have spent more than $8.1 billion buying electricity this year, and they haven't been able to pass those costs to consumers because of state regulations.

Richardson spoke at the beginning of a hearing in Washington by the Federal Energy Regulatory Commission on power contracts, which later was closed to all but the participants. The energy secretary will meet today in Denver with governors and utility company officials from Western states, including Oregon Gov. John Kitzhaber and Washington Gov. Gary Locke.

Efforts to help California have sparked concern among elected officials and utility executives in other Western states, who worry that those efforts could come at the expense of their customers and environmental programs. They have argued for regionwide price caps or other solutions that would treat all states the same.

Richardson said before leaving Washington to fly to Denver that he favors a regional price cap for power to encourage more companies to provide power to California.

Consumers may have to pay more as a result of these talks in Washington D.C. and Denver. Watchdog groups have been left out of the meetings.

"We're furious," said Mindy Spatt, spokeswoman for The Utility Reform Network, a San Francisco-based consumer advocacy group. "They're negotiating again without us, and we're the ones expected to pick up the bill."

Richardson issued an emergency order last week forcing 75 Western power generators to supply electricity to California if needed. The generators had been reluctant to supply power because they are concerned about receiving payment from Pacific Gas & Electric and Southern California Edison.

The California Independent System Operator, which runs 75 percent of the state's power grid, invoked that federal order for the first time late Tuesday.

The two big California utilities are negotiating privately with the administration of Gov. Gray Davis to avoid swallowing $8 billion in debt from paying market prices for electricity while being forced to charge customers regulated prices.

"We are focused on finding a comprehensive solution," Pacific Gas & Electric's spokesman Ron Low said Monday.

Edison International owns Southern California Edison. PG&E owns Pacific Gas & Electric.

Power generators are becoming concerned big utilities won't be able to pay them for power, and if that were to happen, it could prompt cuts in the amount of electricity they send to California, Richardson said at the Tuesday meeting, where guidelines for advance power purchases were debated by companies and California politicians.

"Southern California Edison is warning that thousands could be laid off, maintenance of essential utility facilities could be delayed, and California's electricity supplies could be threatened if generators and marketers become concerned that they may not get paid because of credit issues," Richardson said.

The Energy Department said the company indicated the layoffs would come soon, although it didn't specify when.

"We're trying to anticipate what the actual situation would be," said Edison International spokesman Tom Higgins.

Wholesale prices paid by California utilities jumped in recent weeks to as much as $3,000 a megawatt-hour, compared with an average $32 last December, because of a shortage of power plants, cold weather, surging natural gas prices and a drought that reduced power production in the Northwest.

Utilities buy much of their electricity in advance, but when they don't have enough to meet demand, they go to the spot market. Because consumption has exceeded supplies and cut into reserves, spot prices have soared.

Prices Tuesday on the California Power Exchange, where investor-owned utilities buy electricity, have ranged from $500 to $1,500 a megawatt-hour, based on Bloomberg News data.