San Diego Union-Tribune

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12-Jan-2001 Friday 

CALIFORNIA POWER CRISIS 
   State barely escapes rolling blackouts
     Idled plants blamed; U.S. comes to rescue 

Dean Calbreath and Toby Eckert 
STAFF WRITER | COPLEY NEWS SERVICE 

California risked a series of rolling blackouts yesterday as storms and power plant problems shut down more than a third of the state's electrical generation capacity.

The threat of power outages -- which kept San Diego Gas & Electric on emergency standby -- was averted only when Energy Secretary Bill Richardson ordered generators throughout the Pacific Northwest to sell energy to the state.

"We would not have been able to keep the lights on without Secretary Richardson's order," said Stephanie McCorkle, spokeswoman for the California Independent Service Operator, or ISO, which manages most of the state's power grid.

The threat of blackouts came as gas suppliers throughout the nation said they would no longer sell gas on credit to the nearly bankrupt Pacific Gas
& Electric Co., which supplies much of Northern California. Gov. Gray Davis yesterday rejected PG&E's pleas for state funding to help it secure supplies, saying that it should ask the federal government instead.

In the meantime, Davis, federal officials and industry representatives were negotiating to find a long-term solution to the energy crisis, while legislators in Sacramento took the first steps in drafting emergency power plans.

A dozen or more bills in the special session are expected to deal with market reforms, energy conservation, additional power supplies and the
creation of a new state power authority. The first two bills, affecting power plant sales and oversight of the energy grid, are slated to clear the Assembly and move to the Senate today.

The threat of blackouts occurred after an unprecedented number of power plants shut down or curtailed their energy generation.

The ISO declared a Stage 3 emergency shortly before 9 a.m. when power reserves dipped below 1.5 percent. Throughout the state, power was cut for several hours to "interruptible customers," who pay lower rates for energy under the condition that they can be unplugged during a power shortage.

All three investor-owned utilities in the state -- SDG&E, PG&E and Southern California Edison -- were warned that they might have to engage in rolling blackouts. Under a rolling blackout, utilities typically cut off power to a substation for an hour or so before switching to another substation.

The blackout warning was in effect until late afternoon. And even after that, the ISO urged consumers to conserve power and to hold off on
unnecessary tasks that require electricity. Officials at California State Polytechnic University Pomona considered the threat so serious that they shut down the 19,000-student school for the day to save energy.

The emergency was fueled, in part, by the heavy storm that battered the coast yesterday. The Diablo Canyon nuclear power plant in San Luis Obispo reduced its production by 80 percent because of high surf and concern about kelp and other sea life getting clogged in its intakes.

But not all of the problems were storm-related. One plant reported fuel problems; another suffered "excessive vibrations" because of a mechanical
failure; and two others reported boiler and condenser leaks, said Kellan Fluckiger, who heads the ISO.

The coincidence of so many generators going out at once sparked some suspicions among listeners to an ISO teleconference, who asked if the outages could have been coordinated to drive energy prices higher.

"The number of outages is extraordinarily high," Fluckiger said. "Is this simply a confluence of difficult events or something more sinister? I certainly don't know."

Fluckiger noted that no generators make money when they are off line. But on the other hand, the price of energy skyrocketed yesterday. During the day, the wholesale price of certain electricity supplies hit $1,000 per megawatt-hour, quadrupling the ceiling price of early December.

The ISO does not have inspectors at power plants and relies on plant operators to explain why production has fallen. But the Public Utilities Commission dispatched an inspector to one Northern California plant, Moss Landing Power Plant Unit 7, owned by Duke Energy.

"The problems were relatively minor, but the fact is that these are big machines, and as with any piece of big machinery, things break," said Duke spokesman Tom Williams.

Fluckiger said other repairs may result in 6,000 megawatts coming back into the power grid by Monday, removing the risk of blackouts.

"We have had a number of significant failures, but the return, as scheduled and planned right now, is just as dramatic," he said.

Yesterday, however, the state needed federal assistance to keep the lights on. The blackout threat ended when Richardson issued an emergency order
telling power generators throughout the Pacific Northwest to provide energy to California. About 4,200 megawatts then were transmitted south.

The order -- slated to expire Wednesday -- came after Gov. Davis submitted an energy conservation plan to Richardson detailing his proposal to reduce energy use by 5 percent in the next few days, by cutbacks at state agencies and the university system.

Richardson, who has extended four emergency orders since Dec. 14, allowed the third order to expire after Davis failed to meet a deadline of Wednesday midnight to produce his energy plan. Richardson received the plan Thursday morning.

Davis is slated to outline details of the plan today, as he meets with the governors of Washington and Oregon to discuss regional conservation
measures. Spokesman Steve Maviglio blamed unspecified "bureaucratic snafus" for the failure to meet Richardson's deadline.

The latest power shortage added urgency to the ongoing talks in Washington, D.C., to find a solution to the crisis that has gripped California's deregulated electricity market for months.

Sources close to the talks said power suppliers, utilities and state officials were trying to negotiate a deal for long-term contracts that would allow the utilities or the state to buy wholesale electricity at
about 5.5 cents per kilowatt-hour for a period of five years or more. That is far less than what has been charged in the short-term market to which
California utilities have been tied.

But consumer activists are leery of the deal. While 5.5 cents sounds like a good deal now, "it could turn out to be a mediocre deal once the market price collapses," said Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Until that is resolved, California utilities continue to struggle to pay for energy at soaring wholesale prices.

PG&E, which says it is on the verge of bankruptcy, yesterday unveiled plans to immediately lay off 325 contractors and temporary workers, as well as to slash $180 million from its budget by cutting back on customer services. PG&E plans to cut an additional 675 jobs if its financial situation continues to decline over the next few months.

On Wednesday, PG&E pleaded with Davis to either spend state funds to buy gas directly from wholesalers or extend loans so that PG&E could buy the gas. Yesterday, the governor rejected the request, saying that if PG&E needs money, it should seek help from the federal government, which has so far declined to set a cap on wholesale rates.

Sen. Dianne Feinstein, D-Calif., is preparing legislation that would force federal regulators to impose a cap in 11 Western states or set "reasonable" rates.

Meanwhile, PG&E and Edison are fighting to pass the wholesale prices on to their consumers. They are prohibited from doing so under the state's
deregulation timetable. SDG&E had been permitted to do so, but soaring bills and public rage prompted the Legislature to cap the rates in September. The state has promised to allow SDG&E to recover its debt.

PG&E Chairman and Chief Executive Robert Glynn told CNBC-TV yesterday that raising rates for the consumer was "absolutely in the state's interest," because consumers will not conserve energy until they see a steep increase on their bills.

STAGE 3

The California Independent System Operator, manager of the state's power grid, declared a Stage 3 emergency yesterday after reserves dropped to less than 1.5 percent of available energy.