Posted at 12:22 a.m. PDT Saturday, April 7, 2001

Palo Alto's worst-case energy scenario might come true. Pacific Gas & Electric has filed for bankruptcy protection, and city officials say that means half the city's electric supply is in jeopardy. If a bankruptcy judge voids the contract that brings PG&E power to Palo Alto, for the first time since 1960 the city-owned utility will have to buy a significant amount of its electricity on the open market at prices far higher than it's paying now.

Two other Bay Area cities that own their own utility companies, Santa Clara and Alameda, are in better shape since they either don't contract with PG&E for power or get only a small portion of it from PG&E.

Not so for Palo Alto, which has a 20-year contract with the federal government to provide 85 percent of Palo Alto's electricity. The problem is that the government, through its Western Area Power Administration, buys half of its power from PG&E.

If the middleman is bankrupt, the question is: Who's going to deliver the power?

``That is the BIG question, in capital letters,'' said Councilman Bern Beecham, chairman of the committee that will oversee Palo Alto Utilities if it needs to negotiate contracts for power in the coming months.

``PG&E bankruptcy is our worst-case scenario,'' Beecham said. ``Palo Alto is facing great uncertainty at this point because our long-term contract is now at substantial risk.''

The city council has authorized Palo Alto Utilities to spend up to $50 million this year to buy electricity from other energy providers if a bankruptcy judge voids PG&E's contract with the Western Area Power Administration. That's enough money to pay for about half of the electricity the city needs in a year.

There were already signs that Palo Alto would increase electric rates more than 40 percent this summer. That might be a conservative number now, Beecham said.

``Ultimately our costs will need to rise significantly,'' he said. ``But we don't know what those increases might be or when.''

Santa Clara, which gets less than 20 percent of its power from PG&E, has a sufficient energy supply until summer 2002, said John Roukema, assistant director for Silicon Valley Power, the city-owned utility provider for Santa Clara. ``We don't expect any immediate rate increases,'' Roukema said.

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-- Martin Thompson (mthom1927@aol.com), April 07, 2001