Bush Extends Calif. Power Orders

By H. Josef Hebert Associated Press Writer Tuesday, Jan. 23, 2001; 5:55 p.m. EST

For fair use/educational purposes only!

WASHINGTON –– President Bush ordered a two-week extension Tuesday of federal directives requiring power and natural gas companies to keep supplying California's cash-strapped utilities. A senior official said it would be the last such order.

Energy Secretary Spencer Abraham said the temporary extension were approved to give California "sufficient time to ... restore the financial health of the utility companies and develop other sufficient sources of energy" to meet the state's needs.

California Gov. Gray Davis, who asked that the federal power mandates be continued, assured the administration no further extensions would be necessary, Abraham said.

The president has no plans to extend the directives beyond the two weeks, said a senior White House official, speaking on condition of anonymity.

The directives, first imposed by the Clinton administration in December, require electricity generating companies to continue shipping power into California and for natural gas suppliers to sell fuel to Pacific Gas and Electric. Suppliers have threatened to cut off the state's two major investor-owned California utilities – PG&E and Southern California Edison – because of fear that their mounting $12 billion debt might drive them into bankruptcy and prevent future payments. The federal intervention has been criticized by some Northwestern lawmakers, who said the mandate to sell power to California is jeopardizing power supplies in their region. A relatively dry winter has caused water levels at hydroelectric dams in the Northwest to be lower than normal, raising concern about electricity production this spring.

Sen. Gordon Smith, R-Ore., said Bush assured him in a telephone call that the directives would expire in two weeks and not be renewed. Smith said Oregon "was in jeopardy of becoming an energy farm to California" when electricity is needed in the region.

Meanwhile, there where these developments Tuesday in the California energy dilemma:

–Managers of the state's electricity system scrounged the markets for power amid the threat of renewed rolling blackouts. The power grid was running at a Stage 3 alert with less than 1.5 percent electricity reserves for an eighth straight day.

–The state's utilities asked the Federal Energy Regulatory Commission to create a special agency to investigate wholesale electricity prices in the California market and give it authority to punish those found to be price gouging.

-Power generating companies opposed the proposal, saying FERC and the Justice Department already have authority to investigate abuses.

–California power grid managers told FERC that the state's utilities paid $30 billion for power last year, more than four times the wholesale power costs in 1999.

If answers are not found to the supply problems and price surges, the state's electricity crisis will become worse this summer when demand is expected to be even greater, Anjali Sheffrin, a market analyst for the California Independent System Operator, told FERC staffers.

The California ISO, which manages the state's power grid, had asked the administration to extend the Clinton orders to keep electricity flowing into the state.

Last Friday, outgoing Energy Secretary Bill Richardson broadened the federal edict – under a separate order – to cover suppliers of natural gas to Pacific Gas & Electric for retail use and to fuel power stations.

Because of the utility's precarious financial situation, including its debt of $6.6 billion from past power and fuel purchases, suppliers were threatening to cut off service, Richardson said, jeopardizing the health and safety of PG&E customers.

But federal mandates to sell power and natural gas run contrary to the Bush administration's overall free-market philosophy when it comes to the changing electricity industry.

Still, there has been growing pressure within California's congressional delegation, including a number of Republicans, for federal action to dampen wholesale power costs in California where power has spiked to more than $600 a megawatt hour, five times higher than peaks last summer.

Rep. Duncan Hunter, R-Calif., this week circulated a letter urging other GOP members of the 52-member delegation to join in calling for wholesale electricity price controls, an option Bush has rejected thus far.

"The pressure is definitely there. It's a situation that is going to have to be addressed," said Mark Harrison, a spokesman for Hunter.

Bush administration officials have argued that price caps could prompt suppliers to send power elsewhere, deepening California's supply problem, and dampening enthusiasm for new power plant construction.

"The cure ... can easily be worse than the disease," Gregory Werden, a Justice Department lawyer, told FERC officials Tuesday.

On the Net: Federal Energy Regulatory Commission:http://www.ferc.fed.us/

Associated Press writer Bart Jansen contributed to this report.

-- Swissrose (cellier@azstarnet.com), January 23, 2001