California exhausts $400 million energy fund

10.16 p.m. ET (332 GMT) January 29, 2001 By Brian Melley, Associated Press

SACRAMENTO, Calif. (AP) — California has exhausted a $400 million emergency energy fund, but Gov. Gray Davis on Monday ordered that other state money be used to continue buying power while lawmakers try to resolve the state's energy crisis.

Davis' decision to continue buying power will keep the lights on for the time being in energy-strapped parts of the state, but his administration would not say how much money was available or how long short-term energy buys would remain possible.

The state began buying electricity 12 days ago under emergency legislation that set aside the $400 million. All that money was spent by late Sunday, Department of Water Resources spokesman Mike Sicilia said.

Davis said last week he would use department money to make emergency power purchases if the $400 million ran out.

Lawmakers, meanwhile, were waiting Monday for an audit ordered by the Public Utilities Commission to assess the finances of Southern California Edison and Pacific Gas & Electric Co., which say they have lost a combined total of at least $12 billion to soaring wholesale electricity prices.

The state's 1996 deregulation law prevents them from passing on costs to their customers, and suppliers are refusing to extend credit to the utilities.

Assembly Minority Leader Bill Campbell said lawmakers need to see the audit to know whether the reported losses were inflated.

"What does that audit mean for the legislation we are drafting to solve the rate crisis?'' he said. "We can't craft solutions if someone's playing hide the ball.''

Davis spokesman Roger Salazar said the audit was not finished.

One proposal under discussion would have the state issue revenue bonds to cover the utilities' debts and make their customers pay the money back over 10 years, at rates of 9 percent for residential customers and 7 percent to 15 percent for businesses.

In exchange, California would be granted long-term options allowing the state to buy low-priced stock in the utilities. If the price goes up, the state could sell the stock and use the profits to help pay off the bonds.

Another measure would let the state enter into long-term contracts at low rates to buy wholesale electricity and sell it to Edison and PG&E customers, using the utilities' transmission and billing systems.

Utility officials have declined to comment on the proposals.

With California's crisis tapping electricity resources throughout the West, President Bush called on Vice President Dick Cheney and several Cabinet members to develop a federal energy plan.

Bush said he wanted a strategy on "how best to cope with high energy prices and how best to cope with reliance on foreign oil, how best to encourage the development of pipelines and power-generating capacity in the country.''

The developments came as the keeper of California's power grid extended a Stage 3 electricity alert. The alert, imposed when reserves drop under or threaten to fall below 1.5 percent, has been in effect for all but a few hours over the past two weeks.

Blackouts were unlikely, however, said Stephanie McCorkle, a spokeswoman for the Independent System Operator.

"It's a calm day in the control room,'' McCorkle said.

The state's electricity reserves hovered around 5 percent Monday. The alert was needed to get energy to Northern California from the Pacific Northwest to avoid falling to 1.5 percent, the ISO said.

Most of California's reserves are in the southern part of the state and a transmission bottleneck in the Central California stalls the transfer of electricity to the north.

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-- Martin Thompson (mthom1927@aol.com), January 29, 2001

Answers

WOW, 400 million in only 12 days. If they keep that up California is going to go belly up soon. I wonder what the Bush team is going to bring to stop the bleeding.

-- Martin Thompson (mthom1927@aol.com), January 29, 2001.