Federal commission could act today on Western power crunch

The demand for electricity is very high on the West Coast

Energy secretary: Situation 'improving'

In this story: Rolling blackouts barely averted Richardson: 'Government has to intervene' Evoking the 1970s Low power supplies, high prices RELATED STORIES, SITES

By Thom Patterson
CNN.com Writer

WASHINGTON (CNN) -- Federal energy officials could issue an order today aimed at easing West Coast electricity shortages that have threatened to force some utilities to begin rolling blackouts.

The shortage, which is being blamed on a lack of power plants, has prompted the Federal Energy Regulatory Commission to consider several possible remedies. One alternative would be an order for California investor-owned utilities to buy and sell all of their electricity to and from the state's power exchange, which oversees all California electricity trading.

Another option for the commission would be an order putting price limits on the cost of electricity.

	VIDEO
CNN's Natalie Pawelski reports California's power shortage may not be confined strictly to the West Coast (December 15) Play video (QuickTime, Real or Windows Media)

The commission, in a November 1 announcement of a proposed overhaul of California's power marketing rules, said the state's system was "seriously flawed," causing a "dramatic market meltdown" last summer that exposed customers to "economic risk and financial hardship."

The commission blamed rules that forced utilities to purchase power at more expensive rates.

Rolling blackouts barely averted

On Thursday, Energy Secretary Bill Richardson issued a daylong executive order requiring power generators and marketers to make power available in California. At one point Thursday, the state was just 1,000 megawatts from declaring a Stage 3 alert that could trigger rolling blackouts, California energy officials said. One megawatt is enough elecriticity for 1,000 homes.

Richardson's order stipulated that power should be sold to utilities at a price he considered fair, after some utilities complained that wholesalers were charging unfairly high rates for their electricity.

"We would deny that that's in fact happening. These prices are being driven by the market," Mark Stultz of the Electric Power Supply Association told CNN.com.

Referring to Richardson's order, Stultz said, "We believe that's just a Band-Aid. We all want the lights to stay on. We're ready as an industry to keep the lights on."

Richardson indicated Friday that the situation might be getting better.

"Today things are improving," Richardson told CNN. "The weather is better. We don't anticipate using that authority that would keep the lights on and prevent blackouts."

Richardson: 'Government has to intervene'

But Richardson also indicated that the federal government may eventually step in to ease the crunch.

"I think the government has to intervene and make sure that power is sold to states like California, that consumers are protected, that we ensure that deregulation does not harm consumers in states that have some of these very tight power supplies," Richardson said, appearing on CNN's "Early Edition."

Industry lobbying groups disagree with Richardson's allegation that deregulation -- laws that allow consumers and utilities to buy electricity from whomever they choose -- is to blame.

"This should not be an indictment of competition," said Stultz. "This is an isolated situation in California, given an approach that -- in hindsight -- did not work well at a time of shortage."

Rolling blackouts are possible on the West Coast as the demand for power increases

Evoking the 1970s

Richardson's comments were reminiscent of the 1970s, when an Arab oil embargo sent the nation into an energy crisis, forcing energy prices up and motorists to wait in long lines at gas stations across the United States.

He blamed today's increasing power usage on the booming economy and said, so far, there is no crisis.

But he added, "We've got to think about conserving energy and using energy more wisely, also protecting our electricity grid so that cities and towns and states like California are protected and there are not these blackouts that have been threatened."

Low power supplies, high prices

In addition to the fact that there have been no new power plants built in California in 15 years, Stultz told CNN.com that California was being forced to buy 20 to 30 percent of its electricity under short-term contracts, agreements that usually cost much more than long-term contracts. Stultz said that, if California utilities had purchased long-term contracts, they might have saved hundreds of thousands of dollars, savings that might have been passed on to the consumer.

"For every 1,000 megawatts purchased, they would have saved $200,000 per hour," Stultz said. "There needs to be stability, there needs to be incentive for stable contracts, and systems for additional power supplies to be brought on quickly. "

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California swelters in power-consuming heat wave
August 2, 2000

U.S. Department of Energy
Federal Energy Regulatory Commission (FERC)
Electric Power Supply Association
Northwest Power Planning Council
California Energy Commission
The California Independent System Operator (ISO)
California Department of Water Resources California
Los Angeles Department of Water and Power
Southern California Edison

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