SYSTEM OPERATORS PULL PLUG ON CUSTOMERS FROM BAKERSFIELD TO EUREKA. DAVIS DECLARES AN EMERGENCY, CLEARING WAY FOR STATE TO PURCHASE POWER.
Los Angeles Times
Rolling blackouts dimmed sizable portions of Northern and Central California on Wednesday, shutting businesses and tangling traffic, as state energy operators sent home the message that months of warnings about looming electricity shortages had not been idle threats.
The blackouts immediately hit about half a million homes and businesses throughout the northern two-thirds of the state, from Bakersfield to Eureka, including chunks of the Silicon Valley, Sacramento and San Francisco.
Among those left suddenly powerless were some of the state’s best-known corporations, including Apple Inc. and Hewlett-Packard, whose high-tech staffs were forced to fall back into the Dark Ages of window light and pen and paper.
From dawn to well past darkness, the day was as unpredictable as it was tumultuous. Not only was the power shut off, the teetering utilities also closed their wallets to creditors, and the governor ended the night by invoking his emergency powers.
Gov. Gray Davis signed an emergency proclamation Wednesday night, clearing the way for California to spend unknown quantities of Department of Water Resources’ money to buy power. Davis said he acted after four out-of-state power plant owners said they would bring California’s two largest utilities into bankruptcy after 12:01 p.m. today if the Legislature did not quickly enable the state to make power purchases.
The governor, looking angry and fatigued, refused to say how much money would be needed. “There are so many things in flux,” Davis said. “It’s impossible to give you a number now.”
The blackouts were the most visible result of a months-long energy crisis that has pushed the state’s two largest utilities, Pacific Gas & Electric and Southern California Edison, to the brink of bankruptcy. Edison, which defaulted on some bills Tuesday, faces another crucial deadline today when a $ 215-million electricity payment comes due.
The private agency that operates the state’s electricity grid powered down at 11:50 a.m. after a frustrating morning spent trying to hustle electricity from suppliers in the Pacific Northwest and elsewhere. The immediate trigger for the blackouts was a malfunction that shut down a major electricity generator in Morro Bay. But the groundwork had been laid by months of escalating problems–nurtured by the state’s ill-starred plunge into deregulation–that were exacerbated Wednesday by a cold snap in the Northwest. That drove up demand there, reducing the amount of energy that California could import.
“We called all the usual folks, all the unusual folks, we called everybody,” said Ed Riley, director of grid operations for the agency, the California Independent System Operator. “They gave us what they could and said they were sorry they couldn’t give us more.”
After several close shaves in recent weeks, when the agency managed to scavenge power at the last minute and avoid blackouts, “we seem to be running out of magic,” said Cal-ISO spokesman Patrick Dorinson.
More Blackouts Called Likely
More blackouts are likely today, perhaps as early as 7 a.m., as the grid faces “our most challenging day ever,” Cal-ISO spokeswoman Stephanie McCorkle said. Advance electricity purchases for today fell 45% below demand. The outlook for Friday is even worse, setting the stage for two more days of drama similar to Wednesday’s.
By 2 p.m. Wednesday, the state had been able to tap enough electricity from a supplier in British Columbia to halt the outages in the north. At that point, energy officials were predicting that by evening, about 2 million customers would face blackouts throughout the state, including many in Southern California Edison‘s territory.
At the cavernous, windowless control room of the Cal-ISO in Folsom, in the Sierra foothills east of Sacramento, a dozen men worked through the afternoon on a crescent-shaped bank of computers and phones, trying desperately to scrounge enough electricity to get the state through the day.
Outside, the sun was dropping. Blackouts at night, they knew, would be far more dangerous for drivers heading home from work.
Bob Sullivan, 44, wearing a yellow dress shirt rumpled by 11 hours of work, called suppliers, 30 an hour, inside and outside California. His canvassing finally kicked loose 1,300 megawatts from the Los Angeles Department of Water and Power and the Canadian supplier, allowing the state to get from 5 to 6 p.m. without blackouts.
After that, it was more of the same struggle through the evening.
Why did Canada’s BC Hydro and the DWP come through? Perhaps because operators there realized they would not need as much electricity as they needed earlier in the day. But there could be another reason, Riley said: “This is the highest price we’ve paid for energy all day.”
As it was, many power users throughout Southern California had been braced for outages. In Buena Park, Knott’s Berry Farm shut down its biggest energy user, the Big Foot Rapids Ride.
For the most part, authorities throughout the state seemed well-prepared for the blackouts and handled the situation smoothly.
In San Francisco, the blackouts first hit Chinatown, North Beach and Haight Ashbury. Forty intersections throughout the city were without power Wednesday afternoon, and about 60 police officers were manually directing traffic.
“People were behaving themselves,” said Steve Johnson, director of the San Francisco Department of Parking and Traffic. “Nobody was running intersections. It was a good day for a power outage.”
At least two hospitals, Valley Convalescent Hospital in Watsonville and Community Medical Centers in Fresno, lost power, despite utility assurances that medical facilities would be spared. Neither reported any serious problems, but an official at the Watsonville hospital expressed annoyance that no one had given any warning.
“It’s very inconvenient,” said Jude Hart, the hospital’s nursing supervisor. She said critical functions had been switched over to backup generators, but some parts of the hospital were without power for two hours.
Cal-ISO has ordered rolling blackouts only once before, last June 14. But those outages were limited to the Bay Area and were caused by local supply problems.
Northern California has fewer generating facilities than the south. In fact, Riley said Southern California could have staved off the blackouts in Northern California on Wednesday if there hadn’t been a bottleneck in transmission lines in the Central Valley that limits the amount of power that can be sent from one half of the state to the other.
The blackouts partly reflected the cracks in California’s supply. No new plants have been built in a decade. And many of the existing plants have been closed for routine maintenance or because of equipment failure.
But the state’s electricity crisis is a reflection of more than just generation shortages. Compounding those are the financial woes afflicting PG&E and Edison, the state’s two largest utilities, which have become such bad credit risks that producers don’t want to sell to them.
U.S. Energy Secretary Bill Richardson extended an order Wednesday that requires electricity producers to sell to California, but Cal-ISO Director Jim Detmers said it wasn’t clear whether the order was being followed.
“We don’t have policing authority,” he said.
The order included a new provision permitting federal officials to check the records of power suppliers. The provision was inserted in response to concerns that generators might be holding back, according to an Energy Department source.
“We’ve got enough concern out there that some of these folks may be holding back, that it was important to remind them that we’ve got the power to enforce this action,” said the source.
The utilities’ financial outlook grew even more dire Wednesday. PG&E Corp. and its San Francisco utility failed to pay $ 76 million in corporate IOUs that were due Wednesday. PG&E defaulted after banks refused a request for money to pay off the obligation, PG&E said in a filing with the Securities and Exchange Commission.
As a result, PG&E‘s bond rating was downgraded below junk bond status by Moody’s Investors Service on Wednesday. The debt-rating firm said the utility’s “fragile liquidity position increases the specter of a bankruptcy filing.”
“This is a very serious situation,” said PG&E spokeswoman Renee Parnell.
Edison said Tuesday that it was temporarily suspending $ 596 million in electricity and bond payments to conserve the utility’s $ 1.2 billion in cash. The utility won a brief reprieve–until noon today–on $ 215 million of that, which is owed to the California Power Exchange for electricity that was purchased in December. Under the exchange’s rules, if Edison defaults on that debt, the burden would be shouldered by all suppliers that provided power to the exchange.
Southern California Edison‘s Tuesday default also included a $ 230-million payment of principal and interest on some maturing five-year bonds.
It wasn’t clear how, or if, Davis’ emergency order would affect those deadlines.
The stock of both companies continued taking a battering on Wall Street. PG&E stock slid $ 1.31, to $ 9.63 a share, and Edison International dipped 69 cents, to $ 8.88 a share. Both companies had been valued at over $ 30 a share within the past year.
And not just their financial status has taken a pounding–their political clout may be suffering as well.
“I know that they are not helping themselves up here,” state Senate President Pro Tem John Burton said in Sacramento. “Their currency is thoroughly devalued with a lot of us.”
Davis and state legislators were working on separate tracks to keep the lights on and keep the utilities out of bankruptcy court.
Davis said the emergency proclamation authorizes him, under Section 8625 of the California Government Code, to use money already appropriated to the California Department of Water Resources to buy power. Sources estimated that the department has about $ 400 million available. The DWR operates the Oroville-to-Bakersfield State Water Project and is a large consumer and generator of electricity.
In December and again last week, the DWR–without the knowledge of the governor–purchased electricity for state grid operators at a cost of at least $ 30 million to avoid rotating blackouts.
The idea is to keep lights on for a few weeks, while buying time for utilities to work out their credit problems. Since the state would be essentially selling power to utilities, it would be a “secured creditor,” and thus would be first in line to receive repayment, the sources said.
PUC Chairwoman Loretta Lynch reacted positively to the plan. “I do think it is a good idea in the short term,” she said. “It keeps the lights on.”
Asked whether the state could take steps at this late stage to avert bankruptcy, Lynch said, “If they choose to go bankrupt, it is a business choice. Companies choose to reorganize all the time.”
Consumer advocate Doug Heller of the Foundation for Taxpayer and Consumer Rights assailed Davis’ move, saying, “We’re going to throw taxpayer dollars at these private, profiteering generators so PG&E and Edison don’t go bankrupt, with nothing promised to the public in return.”
But another consumer activist called the governor’s action a necessary step.
“It brings new meaning to the term buying time,” said Nettie Hoge, executive director of the Utility Reform Network in San Francisco.
2 Measures Are Passed
The state Senate–forced to meet in the Assembly chambers because of damage caused by a truck that crashed into the Capitol the night before–passed two other energy-related bills. They were given a final nod by the Assembly and sent to the governor for signing.
One measurewould recompose the board of the Independent System Operator, the nonprofit agency created under deregulation to oversee the flow of power, to make it smaller and more responsive to consumer interests.
Democrats supported the bill as an incremental step toward restoring order in California’s dysfunctional energy market. Republicans criticized it as meaningless, noting that Davis already controls appointments to the majority of the boards.
Sen. Bill Morrow (R-Oceanside) likened the revamping of the boards to “rearranging the chairs on what could be the Titanic.”
The second bill would give the Public Utilities Commission additional power to regulate the assets owned by utilities and would prohibit the sale of any power plant owned by an utility until Jan. 1, 2006.
A new statewide survey showed that Californians are deeply concerned about the power crunch.
Ninety-two percent of those questioned said they view the deregulated electricity market in California as a problem, with 74% calling it a “big problem,” according to the Public Policy Institute of California, a nonpartisan think tank. Eighty-two percent of Californians said they believe the energy crunch will damage the state’s economy in the next few years, with 56% saying it will hurt the economy “a great deal.”
As for solutions, 37% advocated re-regulation of the industry, 32% supported the construction of more power plants and 20% favored greater conservation efforts. Only 1% backed higher electricity prices as a preferred solution to the crisis.
The survey has a sampling error of plus or minus 2 percentage points.