White House: It's now up to California to solve its power crisis

White House spokesman Siewert said Clinton has not acted on a reguest to require out-of-state natural gas firms to sell to Pacific Gas and Electric     WEB EXCLUSIVE Greg Lefevre: California under Stage 3 power alert

Early evening power crunch expected

In this story: Equipment malfunctions State looks to buy power 'Attempting to avoid bankruptcy' RELATED STORIES, SITES

From staff and wire reports

WASHINGTON -- As California struggles through yet another day of trying to keep the lights and heat on across the state, the White House said Tuesday it was up to the state, local utilities and power suppliers to find a solution to the power crisis.

"They themselves have to come up with some sort of solution," White House spokesman Jake Siewert told reporters. "The federal government has a limited role."

Talks overseen by the White House and Energy Department last week produced a proposal from California Gov. Gray Davis for the state to buy electricity and sell it to utilities. That proposal is to be introduced Tuesday in the state legislature.

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Meanwhile, California's second-largest utility told federal regulators Tuesday it didn't have $596 million to pay a wholesale electricity bill.

Siewert also said President Clinton still has not acted on Davis' request that Clinton require out-of-state natural gas firms to continue selling their gas to California's No. 1 utility, Pacific Gas and Electric Co.

Electricity sellers also have been increasingly reluctant to supply California because of the utilities' dwindling finances.

Both major utilities saw their credit ratings Tuesday cut to low junk status by leading rating agencies, putting them in default of bank loans and credit lines and moving them closer to bankruptcy.

Equipment malfunctions

The next power crunch for California was expected early Tuesday evening. The state remains under a "stage 3" alert -- the most extreme signal of a power emergency -- but it found sufficient reserves to avoid blackouts through the morning.

The current problem, according to ISO spokeswoman Lorie O'Donley, is unplanned outages.

"There are 10,700 megawatts of power unavailable today" due to equipment malfunctions, said O'Donley. "There are also gas curtailments in San Diego affecting 800 megawatts. This combination of factors is what led to a stage three alert today."

California Independent System Operator (ISO) spokesman Patrick Dorinson said a shortage of natural gas forced many power plants in Southern California to switch to oil. Power-producing problems are possible and could worsen Tuesday's power shortage.

A stage 3 alert means power reserves have fallen below 1.5 percent and rolling blackouts are a possibility.

Blackouts are an emergency measure to prevent a collapse of the power grid. Rolling blackouts involve switching off entire neighborhoods for about an hour at a time to relieve the strain on the system.

This is the second Stage Three alert to be called in one week.

Last week, a Stage 3 alert was called when the biggest storm to hit the state in three years cut electricity generation at a key nuclear plant. The alert was dropped back to Stage 2 on Friday, when more power became available from other states.

State looks to buy power

Trying to solve the problem, state and federal officials have been meeting in recent days with utility executives and electricity wholesalers. State lawmakers are studying a proposal from the governor for the state to buy electricity and sell it to utilities.

Davis believes the state can negotiate better prices than the utilities, which have seen their credit ratings plummet in recent months.

"By the state buying it and selling it, we have credit worthiness," says state Senate President John Burton. "We have the ability to get into long-term contracts, which should mean lower prices."

The state is seeking contracts with power providers at a rate of 5 to 5.5 cents a kilowatt-hour. While that's higher than the 3 to 4 cents a kilowatt-hour that electricity sold for a year ago, it's considerably lower than the 30 cents a kilowatt-hour Southern California Edison says it has had to pay in recent months.

'Attempting to avoid bankruptcy'

A quick solution is especially crucial for SoCal Edison. On Tuesday, the privately owned utility told the federal Securities and Exchange Commission it would temporarily suspend a $596 million payment to the state Power Exchange, which manages the wholesale buying and selling of electricity.

SoCal Edison reported it would run out of cash February 2 because its debts for buying electricity amount to nearly $1.5 billion and its cash reserves to only $1.2 billion.

"SCE is attempting to avoid bankruptcy," SoCal Edison said in its SEC filing.

The move came a day after a major power provider, Dynegy Inc. of Houston, threatened to take SoCal Edison and Pacific Gas & Electric Co. to bankruptcy court if they didn't make payments due this week.

PG&E officials said Monday that they would pay their $40 million bill due this week. The utility has approximately $500 million in cash, a spokesman said, with a bill for about $580 million due February 1.

San Francisco-based PG&E and SoCal Edison, which is based in the Los Angeles suburb of Rosemead, say they have lost billions of dollars because a rate freeze imposed by the state in the initial phase of its deregulation program prevented the utilities from passing on hikes in wholesale prices.

CNN San Francisco Bureau Chief Greg Lefevre, The Associated Press and Reuters contributed to this report.

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Dynegy
PG&E Corporation
SoCal Edison
  • Deregulation - What this means to you - Electricity Market Issues
California Power Exchange
System Conditions - The California ISO
California Public Utilities Commission
California Utilities Emergency Association

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