----- Original Message -----
From: Gene Cramer
Sent: Friday, December 15, 2000 2:44 PM
Subject: Energy Looking Glass 2000dec14 15 MINUTES TO BLACKOUTS
U.S. STEPS IN TO AVERT BLACKOUT
ENERGY: Secretary Richardson orders the selling of electricity to utilities in California. Meanwhile, Edison chief denounces deregulation.
U.S. intervention provides relief in state's power crunch
The Orange County Register 2000dec14
By Kate Berry and Dena Bunis
U.S. Energy Secretary Bill Richardson invoked federal emergency powers Wednesday to force power generators to sell electricity to California’s two largest utilities to avert rolling blackouts throughout the state.
And in a stunning acknowledgement, John E. Bryson, chief executive of utility holding company Edison International who was one of deregulation’s chief proponents, called for re-regulation of wholesale power prices.
"It is time to break, decisively from this failed policy," Bryson said. "We need to reform and, where necessary, re-regulate California's electric system.”
The energy crisis in California reached a breaking point Wednesday morning when the operator of the state's electric grid said a dozen power suppliers -- most of them out-of-state municipal utilities -- refused to sell electricity to Southern California Edison and Pacific Gas & Electric. They were afraid the two utilities would be unable to pay for it.
As electricity prices soared this year, the two companies have shelled out more than $7.2 billion in higher wholesale prices that can't be passed on to consumers because of a rate freeze.
The state's grid operator, the Independent System Operator, said virtually no power came into the state early Wednesday. It called Gov. Gray Davis and James Hoecker, chairman of the Federal Energy Regulatory Commission, for help. Facing a shortage of 1,000 megawatts, the grid operator told Davis and Hoecker that residential neighborhoods would face rolling blackouts starting 1:00pm.
At the time, the two officials were meeting with Richardson in the office of U.S. Senator Dianne Feinstein. Richardson decided to invoke the Federal Powers Act -- the first time he has used this authority -- to get much-needed juice flowing to what would be the world's sixth-largest economy.
"Our objective is to keep the lights on in California," Richardson said after the meeting. "What is needed is some type of settlement conference to deal with all these issues all the parties involved."
His order called for:
(1) Generators to immediately sell power to the state’s utilities.
(2) The Department of Energy to set rates for how much generators can charge while ensuring that they receive "a fair return."
(3) Two federal generators, the Bonneville Power Administration and the Western Area Power Administration, to immediately direct as much power as possible to California.
(4) FERC to consider a regional price cap for the Western states.
State Senator Debra Bowen, D-Redondo Beach, who chairs the Senate Energy, Utilities and Communications Committee, said Richardson's actions came "just in the nick of time."
“It’s the first ray of hope from the federal government since this all began early
this summer”, she said.
Immediately, after Richardson’s order, power generators began offering about 5,000 megawatts of electricity into the ISO's last-minute market, which helped avert blackouts, said Kellan Fluckiger, the ISO's chief operating officer.
Contradicting the ISO's account, several power suppliers said they never refused to sell power to California. "We've been active in the California market all along", said Steve Stenfel, spokesman for Dynegy Inc. of Houston.
Feinstein and Davis both said the emergency order was called to ensure the viability of Edison, which employs 13,000 workers in California, and PG&E, with 20,000.
"If these companies do go bankrupt and stop service, there is no one to pick it up", she said. "So this is the real heart of the emergency. It could have a very dramatic ripple effect on the economy, obviously impacting high-tech and agriculture."
Meanwhile, the president of the California Public Utilities Commission said it may allow the utilities to raise rates. Loretta Lynch, who last week refused to allow Edison and PG&E to charge consumers more, said she’s reconsidering because of the companies' financial conditions.
But Doug Heller, a consumer advocate with the Foundation for Taxpayer and Consumer Rights, said it was disingenuous for Edison to call for re-regulation. Edison, parent of Southern California Edison, which supplies electricity to most of Orange County, was one of the architects of the electricity-deregulation law that was enacted in 1996.
“Our paranoia is that everything is a ploy to get the billions back from ratepayers,” Heller said, adding that the utilities pocketed $17 billion under deregulation, mostly by selling generating plant. They still own some plants, which are reaping a windfall from sky-high prices.
Separately, state and federal energy officials said measures being taken to alleviate this winter’s power crunch could result in worsened shortages next summer. Federal hydroelectric dams are tapping reservoirs to produce extra power. That means reservoir levels will be lower when demand for water peaks next summer.
"These are megawatts that come at a cost”, said Fluckiger at the ISO. "It’s a real delicate balancing act at the moment.”
included time schedule shows that 15 minutes elapsed between Richarson issuing the order, and generators begin offering power for sale.