State moves out of power alert for first time in weeks

KAREN GAUDETTE, Associated Press Writer

Thursday, February 22, 2001

©2001 Associated Press

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/02/22/state1347EST0175.DTL

(02-22) 12:51 PST SAN FRANCISCO (AP) -- California called off all power alerts Thursday for the first time in nearly six weeks, thanks to the availability of more imported electricity and the return to service of power plants that had been down for repairs.

The Independent System Operator canceled a Stage 1 alert that had been declared Wednesday. Until last weekend, the state spent 32 consecutive days in a Stage 3 alert -- the most severe of the alerts, warning that reserves were dangerously low and that rolling blackouts were possible.

Until Thursday, the last time California had been free of all alerts was Jan. 13.

Meanwhile, officials said fears that natural gas supplies in Northern California would be depleted by the end of February have eased because more suppliers have agreed to deliver gas to Pacific Gas and Electric Co. -- and the utility said it will pay all its suppliers Friday for gas delivered in January.

At the state Capitol, lawmakers worked on bills they hope will result in more power plants for California. The Assembly Natural Resources Committee approved two bills, sending them to the energy committee for further hearings next week.

One bill would require local governments in areas where power demand exceeds production to identify potential sites for new power plants. The other would speed up state approval of the remodeling of old or retired power plants.

A federal judge is expected to decide Friday whether wholesalers can be forced to sell to the state power grid, even without a creditworthy buyer. A temporary restraining order requiring three generators to keep selling power to the ISO expires Friday.

ISO spokeswoman Lorie O'Donley said Thursday that attorneys for the grid and the generators are negotiating an out-of-court settlement and ``trying to see if an agreement can be reached'' before Friday.

``We have not entered into any deal to make the TRO from Judge Damrell go away,'' Richard Wheatley, a spokesman for Houston-based Reliant Energy, responded Thursday afternoon.

The Public Utilities Commission met Thursday to consider who should foot the bill for the electricity that California's two-largest investor-owned utilities can't generate or buy on their own.

Under a recent law, the state Department of Water Resources was tapped to buy electricity for cash-strapped PG&E and Southern California Edison Co. The two utilities have battled to stave off bankruptcy for weeks, and have such low credit ratings that no power companies will sell to them.

But the utilities and the state disagree over how the DWR will be reimbursed, a conflict that came before state power regulators meeting in San Francisco.

The PUC was expected to decide whether Assembly Bill 1X meant for the utilities to funnel a portion of their ratepayer dollars back to the DWR to help pay off its debts. Or, if those debts were meant to be paid off through state bonds.

In a letter filed with the PUC last week, the DWR asked state regulators to ensure that it will receive ``at least a portion of its current revenue requirements from the sale of power to retail end consumers.''

But PG&E spokesman John Nelson said AB1X is very clear that the DWR is buying that power to spare the utilities the extra cost to help them get out of their $12.7 billion debt.

``We believe the draft decision undermines the clear intent of the law and what the Legislature said when it passed AB1X,'' Nelson said before the PUC hearing. ``If the CPUC fails to implement the law correctly it could propel the parties toward bankruptcy.''

The author of the bill authorizing the long-term contracts said the legislation's intent was to fully cover the one-third of the power that utilities purchased on the spot market, either through extended contracts or through the state ISO.

Assemblyman Fred Keeley, D-Boulder Creek, said his bill was supposed to cover the full ``net-short'' position --or all of the power the utilities were buying on the spot market. That would include the emergency power purchases grid officials bought to avoid rolling blackouts. That is typically the most expensive power.

Both planned to make their case before the PUC on Thursday. The commission is also expected to address requests from Northern California power plant operators that they be among the last to lose access to natural gas should there be a shortage.

The state, through the DWR, was authorized by Keeley's bill to buy power for customers of the two utilities. The DWR has spent about $2 billion to purchase power for the two utilities. The rest is provided by the utilities' own plants or through existing long-term contracts.

On the Net: Read the bills, AB9x by Assemblyman Keith Richman, R-Northridge, and AB36x by Assemblyman Rod Wright, D-Los Angeles, at

http://www.sen.ca.gov

-- Swissrose (cellier3@mindspring.com), February 23, 2001