Power woes trickle out of California

By PAULINE ARRILLAGA Associated Press

Burden already being felt in other Western states

FLORENCE, Ariz. - Jim Cuvellier has enough keeping him up nights - heart problems, his wife's failing sight, the cost of prescription drugs.

The last thing he needs to worry about is electric rates.

Yet when the 84-year-old retired bricklayer received his electric bill in December, a $17 surcharge was tacked on. Last month, the fee rose to $22 and now the utility is warning that his $100 bill could more than triple.

When Cuvellier hears government types refer to the power crisis as "a California problem," the blood rushes to his crinkled cheeks.

"We're not taking the whole brunt, but we're taking part of it," groans Cuvellier, who lives on just $1,314 a month in Social Security. "It's beginning to tighten up on us, and it doesn't help my heart any."

California's power squeeze is sending ripples across the country, from this Arizona retirement community to a New Mexico mining town, a Washington aluminum smelter and beyond.

Utility bills are soaring. Energy-intensive industries are ready to halt production and lay off workers, while others already have shut down to sell power to California instead. And states from New Mexico to Louisiana are reconsidering their own deregulation plans.

The consequences are more immediate in the West, and Energy Secretary Spencer Abraham met with 10 Western governors Friday to examine the crisis. But economists and energy experts say the problem could swell - threatening an already faltering national economy.

One concern is rising costs associated with the production of goods and services in California, a major trading partner to the rest of the United States. Computer makers that buy parts from Silicon Valley may have to pay more if electric rates raise the cost of business. Flower shops that purchase poinsettias from California could have to shell out more money to keep greenhouses going.

"It's the, 'When California sneezes, everybody gets a cold' kind of problem," says Harvard University energy expert William Hogan.

Hogan likens the power crunch to Chrysler's bankruptcy problems of the '70s and the savings and loan collapse of the '80s. In both cases, the federal government came to the rescue with billions in bailout money.

"We couldn't let them sink in the sink or swim mentality," says Hogan, adding that the same is true for the California crisis. "It's too big to simply ignore. Whether or not California created it, it's so bad that it affects everybody."

Cuvellier and his neighbors at the Caliente Casa de Sol RV park wholeheartedly agree.

Last month the San Carlos Irrigation Project, which supplies electricity to the retirement community 65 miles southeast of Phoenix, warned that rates would rise as much as 300 percent in the next billing cycle. The reason: The cost of power on the open market had jumped from $25 a megawatt a year ago to around $300, peaking at more than $1,000.

Wayne Nordwall of the Bureau of Indian Affairs, which operates the utility, is scrambling to find cheaper power or an influx of federal money to keep the utility from having to pass the costs on to its 15,000 customers, mostly retirees on fixed incomes and poor American Indians.

Silver City, N.M., is bracing for its own financial crunch after Phelps Dodge Corp. alerted 1,610 employees at two nearby copper mines that they may be out of work, partly because of higher power costs caused by California's crisis. An additional 740 miners in southeastern Arizona also face layoffs.

The job losses would be a big hit to the economy of Silver City, a blue-collar community of 12,000 in southwestern New Mexico. The mines are the largest source of employment in the area, which already suffers higher-than-average unemployment rates.

"It hurts. Our smaller businesses are going to take a financial hit because those people would not be shopping in the community," says Linda Miller, executive director of the Silver City-Grant County Chamber of Commerce.

She notes the effects are more than economic.

"These people are Boy Scout leaders, softball coaches. If they don't have employment, they're going to have to be looking at some very difficult choices. Do we stay or pack up?"

In Mead, Wash., Kaiser Aluminum closed its smelter because it's more profitable to sell electricity than use it for production. About 550 workers were laid off and will receive only part of their salaries during the shutdown. Montana's Columbia Falls Aluminum Co. followed suit.

Nevada and Arizona had to negotiate with California to ensure that pipelines carrying gasoline and jet fuel to their states would keep pumping after the flow was interrupted during last month's blackouts.

And energy reserves in Oregon and Washington have been strained because of government orders forcing utilities to supply power to California. Washington's Tacoma Power, which serves 146,000 customers, imposed a 43 percent surcharge on residential bills in December.

Washington Gov. Gary Locke says the energy crisis is "not just a West Coast problem, it's a national problem" that is draining more than $1 billion out of the Northwest.

"It's devastating our economy," Locke said Friday at the Western governors' meeting.

Across the country, some states that were in one stage or another of deregulating their own utility markets have put plans on hold, trying to avoid a California-type situation.

Not all the consequences have been bad. Several states, including Texas, Tennessee, Washington and Nevada, are using California as an advertising plug to woo new businesses. "Unlike California, we've got power," jeers Jeff Moseley of the Texas Department of Economic Development.

James Sweeney of Stanford University's Institute for Economic Policy Research says the situation will only worsen until California increases rates, encourages conservation and brings new generating plants online.

"If we fail to bite the bullet," says Sweeney, "any ripple effects that exist are going to be larger."

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-- Martin Thompson (mthom1927@aol.com), February 05, 2001