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12:30 EDT Friday

Forecast sees 34 blackouts over 90 days

California can expect 34 rolling blackouts spread over 90 days this summer, according to information released today at an energy summit in Sunnyvale.

"If we do not band together ... we're told that this is our fate," says Carl Guardino, president of the Silicon Valley Manufacturing Group and one of the five members of the board governing the Folsom-based California Independent System Operator, manager of the state's power grid.

Guardino cited the California Energy Commission for the specific blackout forecast.

Rolling blackouts are ordered when the supply of electricity barely exceeds expected demand. Individual utilities decide which customers are turned off and for how long.

Past rolling blackouts have lasted about 90 minutes each, although there have been variations linked to the time it takes to restore power fully to a given circuit.

The Sacramento Municipal Utility District has said it expects roughly 100 hours of blackouts this summer.

The Sunnyvale conference, like others this spring, preached the importance of saving huge amounts of power. Said Jim Beall, Santa Clara County Board of Supervisors chairman, "It's got to be like a movement."

Copyright 2001 American City Business Journals Inc.

http://sacramento.bcentral.com/sacramento/stories/2001/04/30/daily43.html?t=printable

-- Martin Thompson (mthom1927@aol.com), May 04, 2001

Answers

This estimate makes reasonably optimistic assumptions, that plans to mitigate the crisis will be, at least in large part, successfully implemented. This article from the Los Angeles Times shows that this may not be the case.

Hyperlink: http://www.latimes.com/cgi-bin/print.cgi

Friday, May 4, 2001

GOP Tries to Force Its Dramatically Different Energy Plan on Governor

By MIGUEL BUSTILLO, Times Staff Writer

SACRAMENTO--Republican lawmakers are trying to force Gov. Gray Davis into a dramatically different exit strategy for the energy crisis: writing off the $5 billion the state has already spent on electricity and borrowing billions less to finance future power purchases. GOP lawmakers are holding up emergency legislation needed to replenish the budget for power costs, because they don't think the Democratic governor's plan to get California out of the power business will work. They say the plan is full of dangerously optimistic assumptions, such as estimates that 90% of the state's alternative energy producers will be generating electricity this summer--only two-thirds are now--and that Californians will use 7% less electricity. Although Republicans don't control either house, the emergency legislation requires a two-thirds vote, which gives the GOP significant sway. The plan from the Republican leadership would commit taxpayer money for the first time to an electricity problem that has only affected customers of private utilities. Because the plan is sure to draw strong opposition from politicians in Los Angeles and other areas served by public power agencies, Republicans have included a complex, $1.5-billion proposal to provide refunds to those served by municipal utilities. By blocking the emergency legislation, Republicans may stop state Treasurer Phil Angelides from securing a $4.13-billion loan to repay state coffers for electricity purchases--a failure that would reduce the money available to Davis for his next budget and possibly delay his plan to resolve the energy crisis. Angelides needs the bill to guarantee repayment for the loan. If Angelides does not obtain legislative approval by Monday, he will miss a Tuesday deadline lenders had given him to close the loan. That would clearly leave Davis with less money for new education, police and road-building programs as he begins planning his next budget this month. Moreover, failure to pass the bill could delay a record bond issue that Davis promised would replenish the budget and shield it from further energy drains by summer. And it could harm sagging confidence on Wall Street that California can deliver on its plans to manage the energy crisis, Angelides said. California's credit rating has already been downgraded by one credit agency, Standard & Poor's, largely because of concerns about the effect of electricity purchases on state finances.

Negotiations Are Continuing "The Republicans appear to be digging in and playing a dangerous game of financial roulette with the state. This is really ludicrous to me," Angelides said. "Standard & Poor's has already downgraded us. The other credit rating agencies are watching. I just don't understand what the Republicans are thinking." Said Assembly Republican leader Dave Cox (R-Fair Oaks): "We're not prepared to give the governor a blank check." Democrats threatened Thursday to test the Republicans' resolve by bringing the bill to a vote in the Assembly, but backed down. Negotiations among legislative leaders continue. To avoid widespread blackouts, the state government entered the electricity-buying business in January after the private utilities became too burdened with debt to continue purchasing power on the expensive wholesale market. Under a plan approved by the Legislature and signed into law by Davis, the state budget is to be repaid for the power purchases through a massive municipal bond issue, expected to be the largest in American history. The bonds, in turn, are to be paid off by utility ratepayers through a slice of their monthly bills. However, the plan was based on the premise that the state would quickly bring down power costs by entering into long-term contracts with suppliers--a scenario that has yet to materialize. In fact, California's power costs have gone up since January. Lawmakers initially estimated that $10 billion in bonds would allow the budget to be repaid and cover future power purchases. Davis is now proposing $12.5 billion in bonds--and higher electric bills--to finance the state's costs until 2003. Republicans are convinced that it will not be enough. They say the Angelides bridge loan is not needed because the state has money in various funds that could cover power purchases well into the fall. They also confess to political considerations. Republican legislators believe that by allowing Angelides to obtain his loan now, they will be powerless to oppose further borrowing later. The loan Angelides set up with J.P. Morgan Chase and several other financial services companies is to be repaid with the bond issue. If the loan is not repaid by the end of the summer, the interest rate will rise dramatically, a situation that would make it hard for the minority Republicans to oppose more bonds. The strong GOP views were shaped in part by Democratic state Controller Kathleen Connell, who met with Republican legislators earlier this week and shared a highly critical appraisal of Davis' plan. Connell told the Republicans that the governor's strategy was based on a series of assumptions about electricity market conditions in California this summer that, in her view, are highly improbable. "It is almost impossible for all these hypothetical situations envisioned in their scenario to occur at once," Connell said. But even if all the assumptions came to pass, she predicted that California would still need to secure another source of financing by next spring to continue energy purchases. Davis administration officials have rebutted her claim. "I am deeply troubled by this incremental approach to this financing that is long-term in nature and is going to burden the state for many years," Connell said, in what appeared to be a reference to Davis' reputation as a plodder.

Using Surplus to Pay for Electricity Republicans, who have traditionally been opposed to financing public programs with large bond issues, contend that Davis needs to reevaluate his plan. By proposing to essentially forget the $5 billion the state has spent so far on power, they are advocating using up the state's projected budget surplus on electricity costs, even if it means cutting new government programs. "If Gov. Davis continues down this path, he could bankrupt the state," said Assemblyman Dennis Mountjoy (R-Monrovia). "That would have a far greater impact on education." Democrats, who strongly believe that the surplus should be invested in roads, schools and to meet other long-term future needs, are unlikely to ever support the idea. Lawmakers are already discussing outflanking the Republicans by drafting a bill to repay the budget on a nonemergency basis, which would only require a majority vote. That, however, would probably delay the financing until at least August, since nonemergency measures do not take effect for 90 days-- giving California only about six weeks to cut the largest municipal bond deal ever before state coffers begin to empty, according to Angelides. There is another potential consequence: Many of the long-term contracts the Davis administration has reached to purchase electricity contain clauses that may make them void if the state does not obtain financing by July. "This is a very dangerous game," Angelides said. In other electricity developments Thursday: * Over Republican objections, Democrats in the state Senate approved and sent to Davis a far-reaching bill that would put state government in the business of operating its own power plants and selling electricity at cheaper rates than private companies. The bill, SB 6x by Senate leader John Burton (D-San Francisco), would create a state power authority with the ability to finance, buy, own and build generation plants and sell the energy at cost-based rates. on likened the proposed government body to the New York Power Authority, approved by GOP Gov. George Pataki, which brought about a 10% reduction in rates. The difference from the current situation is that "the people of California, the ratepayers, would benefit, and not the corporate officers and not the shareholders" of private energy companies, Burton said. But Republicans attacked the power authority as "more government" that would impose itself on an enterprise better suited for private operators with years of expertise. "This is a horrific mistake and one that California ratepayers will be paying for many years to come," said state Sen. Tom McClintock (R-Thousand Oaks.) * California Secretary of State Bill Jones, a GOP gubernatorial hopeful, released his plan to address the electricity crisis, criticizing Davis' efforts as a state takeover of the power industry. Jones called on the utilities' parent companies to help bail out their troubled subsidiaries and said creditors should accept lower payments on back debts. He also called for creation of a state- federal emergency management plan to deal with any blackouts this summer. Jones made his three-page proposal in a letter to Vice President Dick Cheney, head of the Bush administration's energy task force.

Times staff writers Carl Ingram in Sacramento and Mark Z. Barabak in Los Angeles contributed to this story.

Copyright 2001 Los Angeles Times Fair Use for Research and Educational Use Only

-- Robert Riggs (rxr.999@worldnet.att.net), May 05, 2001.