the film forum library tutorial contact

Beleaguered California Utilities Max Out Credit by Gail Kinsey Hill, Oregonian staff The Oregonian, December 14, 2000

Rolling blackouts are avoided, but the companies' money woes
make neighboring states' power plants hesitant to sell to them

California narrowly averted rolling blackouts Wednesday, but the deteriorating credit worthiness of the state's two largest utilities made power purchases increasingly difficult.

Officials from the Federal Energy Regulatory Commission and the U.S. Energy Department have been making calls on California's behalf in an attempt to bring power into the state from the Northwest and the Southwest, said Lorie O'Donley, a spokeswoman for the California Independent System Operator, which operates 75 percent of the state's power grid.

In response, Bonneville Power Administration, the federal agency responsible for marketing roughly half the power in the Northwest, shipped 1,750 megawatts to California for a four-hour period beginning at 2 p.m. Wednesday.

At least one of Oregon's largest investor-owned utilities also is selling power to California. Walt Pollock, senior vice president of power supply for Portland General Electric, said the sales are being made in small amounts and in off-peak hours.

Portland-based PacifiCorp was not available for comment.

As of midafternoon Wednesday, the California system operator was importing about 5,000 megawatts, or enough power to light 5 million homes. Those megawatts were guaranteed only for a period of several hours and Kellan Fluckiger, the system's chief operating officer, feared they could be exhausted by the evening's peak demand.

About a dozen power providers in Washington and Oregon told the system operator they didn't want to sell into California because they are concerned they wouldn't be paid, Fluckiger said.

Portland General Electric's Pollock said he is becoming increasingly worried about the California utilities' ability to pay their bills but that the utility continues to make limited sales into the state.

"We are assessing California's credit situation day by day," Pollock said. "We're extremely concerned."

A phone call from Energy Secretary Bill Richardson to BPA prompted the federal power marketer to initiate power exports but only after the agency determined the sales and the additional generation it required would not draw down reservoirs and harm endangered salmon.

"Richardson has asked us to do whatever we can to help California, and we have responded," said Mike Hansen, a BPA spokesman. "We're running the system a little harder than normal, but we can handle it."

Hansen said the exports to California may appear harmful to the Northwest, which faced its own power shortage just days ago, but moderating temperatures and conservation efforts have eased demand and made the sales possible.

Instead of receiving money for the transaction, BPA will get power from California in the months ahead, double the exported amount.

PG&E Corp.'s Pacific Gas and Electric Co. and Edison International's Southern California Edison, the state's two largest utilities, have racked up more than $7.2 billion in power-buying losses. While power prices in the state have been soaring, the rates the two utilities charge customers are temporarily frozen under the state's power-deregulation law.

Fluckiger said it's PG&E and Edison's credit problems that are affecting the California system's purchases of power, since the agency's bills are ultimately passed on to the state's utilities. "The ISO itself basically has no assets of significant value," he said.

Standard & Poor's said Wednesday it placed Edison International, Southern California Edison, PG&E and Pacific Gas and Electric on watch for a credit-rating downgrade. Fitch Investors Services Inc. lowered its ratings on the two utilities' debt and preferred stock on Monday.

Pacific Gas and Electric is able to pay its bills for the time being, spokesman Jon Tremayne said.

"We are borrowing money to make the energy payments," he said. "We're paying the price of the market. We're turning around and selling it for significantly lower than that."

PG&E's continued ability to buy power is dependent upon its lenders, Tremayne said. "It's something that can't go on forever."

San Francisco-based PG&E shares fell 13 cents Wednesday to $21.19. Edison's shares were unchanged at $18.56. The shares of Sempra Energy, owner of California's No. 3 utility, San Diego Gas & Electric, fell 19 cents to $22.06.