Power-starved California seeking suppliers

WEB EXCLUSIVE Charles Feldman: California faces down its power crisis

In this story: Oregon senator blasts California Threats of blackouts and bankruptcy Possible political squeeze RELATED STORIES, SITES

From staff and wire reports

LOS ANGELES, California -- California's Internet-based auction for long-term electricity contracts prompted offers from 39 bidders.

But the prices being quoted were well above those hoped for by the power-starved state.

The Wednesday auction was part of efforts to find solutions to California's deepening power crisis. The White House has said it will not force surrounding states to help out much longer.

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California had hoped for bids as low as 5 1/2 cents per kilowatt hour -- but bidders offered on average a price of 6.9 cents per kilowatt hour.

State officials were to begin immediate negotiations with the bidders.

"I expect these bids on long-term energy contracts should stabilize the market and drive the price of electricity down," Gov. Gray Davis said. "This is a key step in our efforts to keep the lights on in California at a reasonable price."

Meanwhile, the White House warned that an emergency order to power generators to sell electricity and gas to California will only be extended for two more weeks and there will be no extensions after that.

"The president believes that this is a problem that can be and should be addressed by Californians. And he wants to be helpful to California to help them to find their own solution," said White House spokesman Ari Fleischer.

Oregon senator blasts California

A neighboring state agrees the energy shortage is California's own creation.

"They've been turning off dams, tearing them out, shutting down nuclear reactors, preventing new utilities from being sited," Sen. Gordon Smith, R-Oregon, told CNN. "We as their neighbors should not have to pick up their tab. It's just really a question of fairness."

Smith also noted that while California has capped its retail prices at between 7 percent to 15 percent, his state and Washington state were looking at average price increases of 30 percent to 40 percent, with one utility in Tacoma, Washington, boosting prices by 50 percent.

Suppliers in the Pacific Northwest and Canada could not keep the power flowing to California Tuesday because hydroelectric capacity in their own regions began to wane, and demand there increased.

"They don't have it to give," said Patrick Dorinson, spokesman for the California Independent System Operator, which oversees the state power grid.

California power managers have called on residents to do everything they can to conserve, even suggesting people planning to watch Sunday night's Super Bowl do so in groups.

Threats of blackouts and bankruptcy

California spent its ninth straight day Wednesday under a Stage 3 power alert, meaning electricity reserves had dropped so low that rolling blackouts were a possibility.

However, a major power generator that had been down for repairs is expected to go back on line by this weekend in central Northern California, adding enough electric juice to the state power grid to light up close to 1 million homes.

Some business leaders took out a newspaper ad to appeal for a fast resolution to the problem. About 1,200 companies signed service contracts that would furnish lower-priced power in return for agreements to have power cut off during a crisis. The growing number of power shortages now threatens the economy and could lead to layoffs, the companies warn.

California's two largest utilities went to court Wednesday to try and block the state's electricity marketplace from seizing assets over missed payments.

Southern California Edison and Pacific Gas and Electric have been driven to the brink of bankruptcy by skyrocketing power purchase costs, which they cannot pass on to customers due to a rate freeze imposed under the state's power deregulation legislation.

Another utility, San Diego Gas & Electric, said Wednesday it was filing with state regulators for approval of a surcharge that would boost customers' electric bills by around 16 percent.

An official with that utility said a sharp rise in wholesale electricity prices meant customers were paying only a "small fraction" of its power costs due to the cap on retail rates passed by state lawmakers last year.

State lawmakers are pursuing other solutions, including one in which California would take over hydroelectric plants or transmission systems of SoCal Edison and PG&E.;

Possible political squeeze

California's governor was asked if it was realistic for his largely Democratic state to expect help from the Republican-controlled Congress or from President Bush.

"I have talked to Bush. I have dealt with him in the past ... we were fellow governors," Davis said. "I believe he will approach this in a practical problem-solving fashion."

But with Bush saying California must fix its own power mess and with talk of a Davis presidential bid in 2004, at least one political analyst thinks the president may be using the power crisis to cut short a potential Democratic challenger.

"It's a nice side effect of the energy crisis shortage," said political analyst Anne Kriegler. "He (Bush) can eviscerate Davis' chances if Davis is not able to handle this situation well in this state."

All eyes are on the California state legislature and the governor to see whether they can generate a viable power plan before the two-week emergency order ends.

CNN Correspondent Charles Feldman, The Associated Press and Reuters contributed to this report.

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Dynegy
PG&E; Corporation
SoCal Edison
  • Deregulation - What this means to you - Electricity Market Issues
California Power Exchange
System Conditions - The California ISO
California Public Utilities Commission
California Utilities Emergency Association

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