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Northwest Ordered to Divert Power to California by Solveig Torvik Seattle Post-Intelligencer - December 14, 2000

Companies want costs to be 'just and reasonable'

Energy Secretary Bill Richardson ordered Northwest power generators yesterday to sell electricity to California's utilities because power supplies had dropped so low that blackouts were likely.

The unprecedented federal order to divert electricity from the Northwest is not expected to cause shortages here -- at least not through today -- according to a spokesman for the Bonneville Power Administration.

But the diversion came at a time when Northwest supplies are low because of load growth and low rainfall and when prices for wholesale electricity have jumped off the charts and threatened the financial stability of utilities.

In response to Richardson's order, the BPA diverted 1,740 megawatt-hours to California from the dams operated by the Army Corps of Engineers on the Columbia River, and other Northwest suppliers sent 3,500 more megawatt-hours to get California through the crisis.

"We are able to sustain this through (today) without impacting normal river operations. There will be no long-term impact on future generation this winter or loss of fish flows in the spring," said Mike Hansen, BPA spokesman.

"The arrangement we have is that we sent 1,740 megawatts per hour to California on an exchange basis. For every megawatt we send, we get two back" at a later time when the California utilities can spare it, Hansen said.

The order came after the California Independent System Operator declared a Stage Two electrical emergency.

A dozen Northwest suppliers demanded cash payment before sending electricity to California. But the biggest buyers, Pacific Gas and Electric and Southern California Edison, are near bankruptcy, California Gov. Gray Davis said in the news conference in Washington where Richardson announced the order.

It was unclear last night how the cash-strapped California utilities will pay for the power supplies Richardson's order procured for them.

Director of corporate communications for Puget Sound Energy, Grant Ringel, declined to say whether his utility had been among suppliers that demanded cash up front, nor would he say whether PSE was sending power to California yesterday as a result of Richardson's order.

Wayne Cousins, a spokesman for Powerex of Vancouver, B.C., the marketing subsidiary of government-owned BC Hydro, said, "We have curtailed sales to the California ISO due to credit concerns."

Powerex is straining to supply its own British Columbia customers, Cousins said, partly because of colder weather than expected.

Davis and Sen. Dianne Feinstein, D-Calif., asked the Federal Energy Regulatory Commission to set a regional price cap on wholesale electricity to prevent the high prices that have destabilized the system.

Puget Sound Energy has filed a petition with the federal regulatory commission asking the agency to cap wholesale prices not just in California but in the Northwest, as well. BPA and other Northwest utilities have signed on to that petition, according to PSE. The federal agency is expected to consider the matter tomorrow.

Friday, FERC lifted price caps in California, and record wholesale prices followed. That brought the crisis to a head, according to Kellan Fluckinger, chief operating officer for the state's ISO.

He called the Northwest suppliers' response to Richardson's order "gratifying" and predicted it would be enough to get the state through yesterday's crisis.

"By no means are we out of the woods," Fluckinger added.