February 6, 2001 California Seizes Assets of Utilities By THE ASSOCIATED PRESS Filed at 5:25 a.m. ET

SACRAMENTO, Calif. (AP) -- Vowing to solve California's energy crisis without outside help, Gov. Gray Davis used emergency powers to seize the assets of a second debt-ridden utility ahead of circling creditors.

The government on Monday claimed ownership of $150 million worth of power-buying agreements from Pacific Gas and Electric Co. before they could be sold by the financially troubled utility's creditors. Davis did the same thing Friday with $300 million worth of Southern California Edison contracts.

The long-term PG&E contracts offered electricity at prices ranging from 6 cents to 13 cents per kilowatt hour, far less than the 25 cents or more the state has been paying on the spot market.

``By acting today we have preserved attractive prices for California consumers. If I had not acted today, these prices would have been lost forever,'' Davis said Monday.

Even with better prices, however, California still faces the question of how to get its hands on enough energy to avoid the mandatory blackouts that hit central and northern California on two days last month.

The Independent System Operator, keeper of the state's power grid, said it was keeping California under a Stage 3 alert until at least midnight Tuesday, for a record fourth consecutive week.

``The risk of rotating blackouts cannot be ruled out,'' the ISO said in announcing the alert, which means power reserves are at about 1.5 percent.

Gray promised to reveal Tuesday the results of bargaining with electricity wholesalers and efforts to provide California with a long-term, affordable power supply. California established a $10 billion fund last week to pay for the electricity.

The White House has announced it would allow a federal order requiring electricity wholesalers to sell power to California's cash-strapped utilities to expire at 12:01 a.m. Wednesday.

``We are moving at warp speed to find every additional megawatt we can,'' Davis said.

California is also considering issuing revenue bonds to help the two utilities pay off their debts, but the utilities have vowed to fight giving up any stake in their companies.

Edison and PG&E say they have lost $12.7 billion in six months, but believe their debts will be erased by the rate increases they expect a federal judge will grant them, perhaps as early as next Monday when the issue is the subject of a hearing in Los Angeles.

The utilities blame their money woes on the state's 1996 energy deregulation law, which forced them to sell their power-generating plants and buy electricity on the open market. But the law didn't allow them to raise rates when energy costs began spiraling upward a year ago.

http://www.nytimes.com/aponline/national/AP-Power-Woes.html?printpage=yes

-- Martin Thompson (mthom1927@aol.com), February 06, 2001