rate increase by Thursday. PG&E estimates that its cash deficit
will total
$4.8 billion at the end of the first quarter, assuming no rate increase,
continued
access to normal credit and retention of credit facilities. In addition,
the
grade, it would constitute a default under its financing agreements. That
would
entitle lenders to accelerate repayment of approximately $185
million in
outstanding debt.
Further, should the company be
downgraded below investment-grade status and
should PG&E be unable to
provide an "acceptable" letter of credit in the
required amounts, this
would constitute a default under various agreements.
If the company were
to default under these agreements, PG&E would be
obligated to pay "at
least" $1 billion.
Standard & Poor's recently warned that PG&E
and Edison are on the verge of
quickly to stem losses. PG&E's Pacific Gas and Electric unit serves
about
4.3 million electric customers and 3.6 million natural gas customers in
California.
Edison International owns Southern California Edison. Utility companies
and
consumer advocates remain far apart on the key question of who shall bear
the
multibillion-dollar cost of a deregulation experiment gone awry in
California.
The state utilities commission will decide on Jan. 4
whether or
not to raise rates enough to stem the financial hemorrhaging by
PG&E and
Edison, the state's two biggest utilities. PG&E and
Edison are demanding
immediate increases for residential and business
customers of as much as
30%, a level they say is required to keep them
from slipping further into
the red. The utilities have issued more than $4
billion of debt this year
just to buy the power they then supply to
customers at frozen rates. The
mismatch between what it costs to buy
wholesale power on the state's
volatile market and the amount that can be
charged is driving the utilities
steadily toward bankruptcy, they say.
Consumer advocates, meanwhile, say that ratepayers shouldn't be
back-billed
billions of dollars because utilities assumed the risk of power costs
under the
state's deregulation law. If rates are raised, consumers should get
something
extra in exchange, they argue. They have proposed that the state buy the
transmission systems of the two utilities, giving the utilities ready
cash, and
then create a California Power Authority that also could build power
plants to
ease the energy shortage that is contributing to high prices. The
utilities aren't
supportive of such a plan.
===========
San
Francisco Holiday Lights Blaze, Not Dampened by Energy Shortage
By DAVID
P. HAMILTON
Staff Reporter of THE WALL STREET JOURNAL
During the
holidays, as California power officials moved the state to its
second-highest level of electrical emergency, 17,000 holiday lights strung
across San Francisco's high-rise Embarcadero Center complex continued to
burn in bright sunshine.
California's energy problems may be
severe, but with electricity prices
capped by law, there are, so far,
relatively few signs that shortages have
driven residential or business
electricity users to cut back significantly
on power consumption. As state
officials struggle with a crisis that could
drag on for a year or more,
environmentalists and power officials argue that
increased conservation
may be the only way to improve the state's power
outlook in the short
term.
With no new power plants expected for some time, "this is a
power drought
we're in," says Stephanie McCorkle of the California
Independent System
Operator, the organization that runs the state's
electricity grid. "We need
to convince Californians to make conservation a
part of their lifestyle
again."
David Goldstein, of the National
Resources Defense Council in San Francisco,
adds: "Conspicuous examples of
energy waste are everywhere."
Such examples, experts say, are particularly
widespread among commercial and
industrial users, who account for nearly
60% of all California electricity
consumption. Most cases are so
commonplace as to be unexceptional, such as
lights or computers left on
after hours or thermostats that aren't turned
down after employees leave
for the day.
Consumers, too, have been slow to get the message,
despite pleas from
government officials and utilities not to turn on
holiday lights until at
least 7 p.m. On Christmas Eve in San Francisco's
Haight-Ashbury district,
many houses were lighted up as early as 5:30
p.m., including one that
featured three stories of icicle lights, several
spotlighted characters
ranging from Santa to a nutcracker, a giant lighted
star and a 10-foot
Christmas tree.
Many big businesses argue that
they already are responsible energy users,
although they draw the line at
what many consider "symbolic" conservation
efforts. At the four-tower
Embarcadero Center, for instance, an official
says holiday lights
represent less than 2% of the complex's energy
consumption, and argues
that other conservation measures more than offset
the costs of keeping the
festive lights on.
During a power emergency such as that experienced
almost two weeks ago,
Embarcadero engineers shut down 11 elevators,
several water-fountain pumps
and nonessential lights in retail areas, says
Steve Colvin, vice president
for property management at Boston Properties,
which runs the center. Only in
the case of the most serious electrical
emergency, a so-called Stage Three
alert, would building managers shut
down the holiday lights, Mr. Colvin
says.
Turning off the lights
more frequently would cause some to burn out more
quickly, and replacing
burnt-out bulbs every day would be "impossible," Mr.
Colvin says. "To keep
it looking like a first-class holiday display, we keep
them on 24 hours a
day," he says.
While many state and local-government offices have
taken steps to cut back
their power usage, some agencies also decline to
take limited -- and
seemingly obvious -- energy-saving measures. The San
Francisco Bay Bridge,
for instance, bears 834 decorative lights that are
lit from dusk to dawn
every day, but the California Department of
Transportation has no plans to
turn them off or even to restrict the hours
during which they are lit, says
Colin Wilson, a department spokesman.
The lights only consume 150 kilowatts a day, costing about $10 a day
to
operate, Mr. Wilson says. Turning them off "wouldn't make a big dent in
the
overall picture," he says, adding that doing so would require
engineers to
close lanes of traffic in order to reconfigure the lights at
five separate
power substations on the five-and-a-half-mile bridge.
Matters aren't helped by the fact that many corporate customers
recently
have bailed out of so-called interruptible-rate programs, in
which they pay
reduced electricity rates in exchange for agreeing to
curtail consumption
when energy supplies run low. In November, 44 out of
212 participants
dropped out of an interruptible-rate program run by
PG&E Corp., the utility
serving much of northern California; some had
been asked to lower
consumption as many as 18 times in the previous year,
a PG&E spokeswoman
says. As a result, PG&E can now call on only
390 megawatts in requested
savings, down from 500 megawatts previously.
Ratepayer-funded spending by utilities on conservation measures has
also
fallen well below levels in the mid-1990s. PG&E hopes to increase
such
spending next year to $169.6 million, up from $152.3 million this
year --
but that level is still one-third less than the $254.7 million it
spent in
1994. PG&E says a 1996 deregulation law and state regulators
have limited
its spending on energy efficiency.
The conservation
news isn't entirely bad. In the first week of December, the
ISO calculated
that actual electricity demand was 1,300 megawatts short of
projections.
Although the organization concedes that its calculation is
imprecise, it
attributes the difference to energy-conservation efforts
spurred by news
reports on the state's power crisis.
The ISO hasn't conducted a
similar study since then, however, so it is
impossible to know if those
conservation efforts have persisted. And while
1,300 megawatts are
equivalent to the power consumed by 1.3 million homes,
they still
represent only a fraction of California's average peak power
consumption
of about 32,000 megawatts during the winter. Nor were the
savings enough
to keep the state from slipping into a Stage Three alert on
Dec. 7,
although the ISO does credit those conservation efforts with
preventing
rolling blackouts that day.
Environmentalists such as Mr. Goldstein
say the only way to build serious
momentum behind conservation is to beef
up building-efficiency regulations
and to offer tax incentives to
businesses that install energy-efficient
equipment. Mr. Goldstein suggests
such steps could reduce electricity demand
measurably by next summer, if
enacted soon.
Still, other power experts remain skeptical consumers
will embrace
conservation unless forced to by significant price increases.
So far,
electricity prices have been capped for most customers by state
regulators,
although utilities are clamoring for higher rates and warning
they may go
out of business without rate relief.
"Clearly, the
price freeze means that folks don't know what their energy use
is [really]
costing," says John White, executive director of the Center for
Energy
Efficiency and Renewable Technology in Sacramento, Calif.
"Conservation is
going to be the first line of defense against this
onslaught, but we're
going to have to raise rates some so people will know
what this costs."
Write to David P. Hamilton at david.hamilton@wsj.com
<
mailto:david.hamilton@wsj.com>