Fed. judge extends Calif. power sales through Feb 16 SACRAMENTO, Calif., Feb 8 (Reuters) - For the third time in as many days, a federal judge on Thursday extended an order requiring four major merchant power suppliers to continue selling electricity to the California Independent System Operator, which manages the state power grid.

The temporary restraining order by U.S. District Court Judge Frank Damrall requires Reliant, (NYSE:REI - news) Williams Cos. (NYSE:WMB - news), AES (NYSE:AES - news) and Dynegy (NYSE:DYN - news), to continue their sales to the ISO through February 16, at which time a new hearing will be held.

The four companies have balked at selling power to the ISO, whose credit ratings have been hurt by the near bankruptcy of Pacific Gas and Electric Co, a unit of PG&E Corp. (NYSE:PCG - news) and Edison International's (NYSE:EIX - news) Southern California Edison -- two of its biggest customers.

The order again backed state lawyers' arguments that the supplies are needed to protect Californians from rolling blackouts as the state struggles with its worst-ever energy shortage.

-- pho (owennos@bigfoot.com), February 08, 2001

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Posted at 6:09 p.m. PST Thursday, Feb. 8, 2001

Citing `catastrophic` crisis, judge orders three suppliers to sell energy to state

YUBA CITY (AP) -- Citing an energy crisis of ``catastrophic proportions,'' a federal judge Thursday ordered three major suppliers to sell electricity to California despite their worry two cash- strapped utilities won't pay for it.

The reprieve for California energy regulators came as the governor announced he will dramatically accelerate power plant construction to try to stave off summer blackouts.

U.S. District Judge Frank Damrell Jr.'s preliminary injunction ensures three key suppliers will not pull about 4,000 megawatts off the state's power grid. That's enough power for roughly 4 million homes.

``The state of California is confronting an energy crisis of catastrophic proportions,'' the judge wrote. The loss of the power they provide ``poses an imminent threat of blackouts.''

The grid's manager, the California Independent System Operator, sought the order, warning that the electricity's removal would disrupt the region's power supply so severely that outages would spread beyond California.

``This would be a serious impact on the safety, health and welfare of not only Californians, but everyone in the Western U.S.,'' said Jim Detmers, the ISO's managing director of operations.

The order, in effect at least until a Feb. 16 hearing on the case, names Reliant Energy Services Inc., AES Pacific Inc. and Dynegy Power Corp.

Reliant had been under a temporary restraining order issued by the Sacramento judge Tuesday night, shortly before the midnight expiration of a Bush administration directive requiring suppliers to continue selling to California despite utility solvency concerns.

The other two companies had voluntarily committed to keep supplying the ISO pending Thursday's ruling.

Houston-based Reliant, which is responsible for about 9 percent of California's energy, has balked at selling the ISO emergency power to send to Southern California Edison and Pacific Gas and Electric Co. It fears it will never be paid by the cash-strapped utilities.

Reliant has asked the state to stand behind the utilities' purchases. Gov. Gray Davis is unwilling to do that because he believes Reliant wants to drive up prices by locking the state into purchases on the costly spot power market, spokesman Steve Maviglio said.

AES and Dynegy said they would exceed their annual air pollution limits if the ISO required them to operate their plants. Air quality regulators reject those claims.

California faced a Stage 3 power alert for a record 24th straight day Thursday. No repeat of the rolling blackouts that darkened large parts of northern and central California for two days last month was expected.

Davis, looking ahead to a summer energy crunch expected to be even worse than the winter's, issued an executive order he said will add enough electricity for 5 million homes by July.

The state will provide $30 million in bonuses and speed up the approval process for small natural gas or renewable-fuel power plants that run only during peak hours of the day, if those facilities will be operating by summer, Davis said.

Such ``peaking plants'' -- which provide 50 megawatts or less during times of high demand -- would go through the state approval process within three weeks. One megawatt is enough electricity for about 1,000 homes.

The governor asked President Bush to direct federal agencies to also issue permits for small plants within the same time frame.

``We will demonstrate that California can cut red tape, build more power and protect the environment,'' Davis said at a news conference in Yuba City, about 45 miles north of Sacramento, where a new 545- megawatt power plant is expected to be operating by July.

The bonuses, provided with taxpayer money, will be allotted according to plant size. The bonus would be about $1 million for a 50-megawatt plant, Davis spokesman Maviglio said.

The White House is reviewing the governor's request, spokeswoman Claire Buchan said.

The state Energy Commission estimates California could fall 5,000 megawatts short during the hottest periods this summer. That's enough power for roughly 5 million homes, the amount provided by July under Davis' plan.

In addition, the state will push to add 5,000 megawatts of in-state power production by July 2002 and another 10,000 by summer 2004, Davis said. He said no pollution standards would be eased to accomplish it.

The state will provide at least $300 million in tax credits and other financial incentives to beef up business and residential use of renewable energy, including wind-driven and solar power, and retrofit natural gas plants owned by municipal water districts.

For larger plants that could operate during peak demand periods next year, Davis' order would cut the approval period to four months; it now normally takes more than a year. Davis reinstated an expedited process that expired in October.

Winston Hickox, head of the state Environmental Protection Agency, said he had no estimate on the number of companies who might be interested in building power plants.

``A tremendous number of people have come out of the woodwork with ideas,'' Hickox said.

The military has offered defunct bases as sites, and oil companies and other industrial power users are interested in building cogeneration plants, he said. Such facilities harness a byproduct of manufacturing such as steam to produce power.

The state is trying to find a permanent solution to the energy crisis, which is blamed on the results of deregulation, limited hydroelectric supplies, transmission problems and aging power plants taken out of service for maintenance.

A week ago, Davis signed a law allowing the state to negotiate long- term power contracts that would have California spend an estimated $10 billion raised through the sale of revenue bonds to provide power to PG&E and Edison's nearly 9 million customers.

California has already committed at least $1.1 billion to short-term power purchases for the utilities since mid-January.

PG&E and Edison say they have been driven nearly $13 billion in debt since June under soaring wholesale electricity costs that California's 1996 deregulation law bars them from passing onto customers.

Lawmakers are working on a proposal to acquire PG&E's and Edison's transmission lines to help the utilities pay their wholesale power bills.

http://www.bayarea.com/c/breaking/docs/084801.htm

-- Martin Thompson (mthom1927@aol.com), February 08, 2001.