Feds, state and utilities meet to broker electricity deal

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Will STAND for AMs

The Associated Press

State and federal officials met with representatives of power companies during a seven-hour bi-coastal video conference convened Saturday to help solve the state’s ongoing electricity crisis.

It was expected that the meeting, which took place in Los Angeles and in Washington D.C. until late Saturday, would lead to further negotiations over the next two days, said Gene Sperling, President Clinton’s top economic adviser.

“I don’t think any of us expect to get to the finish line tonight,” Sperling said. “The issue now is for them (Gov. Gray Davis and state legislators) to work out the proposal and to work with the parties to make sure it is viable.”

About 30 people, including the governor, key members of the state Legislature, the head of the state’s Public Utilities Commission and utility representatives, gathered at the Ronald Reagan Building in downtown Los Angeles to confer via a video satellite link with counterparts across the country.

Davis recommended that California be authorized to buy power. The state is “a credit-worthy purchaser. All of us that met today are joined at the hip and if we are going to move forward, we will move forward together.”

Davis expected a set of working groups to meet again by Tuesday to alleviate rate hikes experienced by customers.

“I’m not going to have ratepayers undertake any undue costs from a flawed system,” the Democrat said.

Representatives from power providers Pacific Gas & Electric, and Southern California Edison, refused comment after the meeting.

Douglas Heller of The Foundation for Taxpayer and Consumer Rights, a consumer advocacy group, was wary about the late-night decision.

“If the state becomes a public power agency buying electricity, will the public benefit from that?” Heller asked. “Or is it a mechanism for giving utilities their bailout?”

Participants in the nation’s capital included: the National Economic Council director Sperling, Treasury Secretary Lawrence Summers, James Hoecker chairman of the Federal Energy Regulatory Commission, Deputy Energy Secretary T.J. Glauthier and officials from power companies.

Summers said action must be taken in California.

“People in California will be talking to each other, pursuing these ideas … I think there’s a clear recognition of the importance of working the situation through,” he said, declining to elaborate.

Hoecker also declined to detail what progress was made in the talks.

“We are going to work in small groups … over the next couple of days,” said Hoecker. Asked if top company officials will be involved, he said, “We’ll be available any time.”

The parties have been considering a proposal that would allow California to enter into long-term contracts with electricity wholesalers, then sell the power to utilities, said Steve Maviglio, a spokesman for Davis.

The length and price of the contracts still need to be negotiated.

The move by the state to purchase electricity would follow a precedent set by the state Department of Water Resources, which has spent roughly $30 million in recent weeks to stave off rolling blackouts.

The department bought about 24,000 megawatt hours of electricity Thursday and Friday to bolster the power supply in the face of possible outages, Carl Torgersen, the department’s chief of utility operations, said Saturday.

The department, acting under authority of emergency orders by U.S. Energy Secretary Bill Richardson, also bought power last month.

The Water Resources department is sometimes called on to provide emergency water supplies, but the multimillion dollar electricity purchases were groundbreaking.

“(This) is something we’ve never done before,” Torgersen said. “We’re in a new era with deregulation.”

Energy Secretary Richardson on Thursday extended an emergency order requiring out-of-state power suppliers to direct excess power to California and to keep selling to PG&E and SoCal Edison despite their poor credit.

Gov. Davis on Saturday asked Clinton to use his emergency powers to direct Richardson to issue a similar order that would apply to natural gas.

Provisions of the Natural Gas Policy Act of 1978 could be invoked to require out-of-state natural gas producers to continue supplying PG&E, Davis said.

“There is an imminent impact to public welfare based on the prospect of natural gas interruptions, including the exacerbating effect such interruptions would have on California’s electricity grid,” Davis said in a statement. “This imminent gas shortage endangers the supply of natural gas both for PG&E‘S residential and business customers and also for service to electric generating plants in northern and central California.”

California has been strapped for power for months because of a failure to anticipate rising demand; a rise in prices for natural gas needed to run generating plants; the shuttering of numerous plants for maintenance and the effects of deregulation. With many plants now in the hands of wholesalers, the prices utility companies pay for electricity have increased fivefold in California since last summer.

Power reserves in California dipped below 2 percent Thursday after a storm cut production at a key nuclear power plant. That led Thursday and Friday to Stage 3 emergencies, which alerted Californians that rolling blackouts might be needed to relieve a power grid operating with minimal reserves. Ultimately the state made it through those emergencies without forced outages.

Davis and governors John Kitzhaber of Oregon and Gary Locke of Washington have urged residents to cut their electricity use by as much 10 percent while federal, state and corporate officials try to solve the region’s power crisis.

Davis also plans to cut California electricity use during peak periods by at least 5 percent by Tuesday.

Davis and California’s two largest investor-owned utilities have pointed fingers at energy wholesalers in the power crisis, saying they have exacerbated it by taking advantage of the tight supplies for their own profit.

PG&E and SoCal Edison say they have lost more than $9 billion because of wholesale price increases and the state’s 1996 deregulation law that froze rate hikes. The utilities, which recently won permission to raise rates, said the temporary increases approved by the Public Utilities Commission weren’t enough and have warned they could go bankrupt if something isn’t done.

Sen. Dianne Feinstein, D-Calif., said she would propose legislation to give the U.S. energy secretary authority to cap skyrocketing wholesale electricity prices in 11 western states. It would let the secretary impose a temporary wholesale price cap if there is “unjust pricing” and would remain in effect until prices stabilized, said Howard Gantman, the senator’s spokesman.

“We think people will listen to this,” Gantman said. “People in other states are realizing that how California goes, so goes the West.”

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