Proud state forced to knees in power hunt

Robert Salladay, Chronicle Sacramento Bureau Thursday, May 10, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/10/MN40227.DTL

California has turned into the trailer park next door, the cash-only, deadbeat neighbor forced to beg for enough power to keep the swamp cooler running.

Yesterday in Folsom, home of the state's energy managers, was another study in high-tech, air-conditioned humiliation -- punctuated by a frantic scraping and bowing for energy across the West.

Poor people with "secured" credit cards can relate to the scene at the California Independent System Operator. This week began with Canada's BC Hydro threatening to shut off power again until the state actually wired cash to its bank account.

"We got the money," an ISO engineer stood up and told another employee at the agency's semi-secret Folsom headquarters yesterday. "Yeah, we're good for another $14 million. Burn it up, huh, Lloyd?"

Lloyd started burning it up, thanks to an OK from the Department of Water Resources and to several million California taxpayers' footing the bill.

California narrowly missed a third day in a row of blackouts yesterday. The situation was tight when a power plant in Pittsburg shut down because its boiler was leaking, but cooler weather and increased supply from other generators helped keep the lights on.

All week at the ISO, engineers have been fretting about facilities and finances.

BC Hydro shut off 2,000 megawatts of power to the state Monday while it waited for a check from the water agency. The state has a line of credit with BC Hydro, but California is buying so much at such high prices that it was reaching the limit.

The company already is owed about $307 million from the state's insolvent utilities, so it is impatient.

"They wanted to make sure we were good for it before we could continue," said Oscar Hidalgo, a spokesman for the water agency, which is paying the bills.

The power cutoff sent the ISO into a panic, since BC Hydro was providing enough to power an estimated 2 million homes. Two hours later, the state marched down to the bank and wired the money. Power was restored, and an agreement was reached yesterday for daily payments.

The engineers in shirtsleeves at the ISO aren't used to this kind of treatment. Since the energy crisis drained the bank accounts of the utilities, it's been months of constant struggle to get power generators to fork over electrons.

"We have to go into higher begging mode for generators out of state," said Jim McIntosh, director of grid operations for the ISO. "It scares the hell out of these guys. They've never been put in that position. . . . From the electricity standpoint, we're operating like the Third World."

The ISO has no control over energy prices or even how the bills are paid. The bills are the job of the water agency, which has been spending about $50 million a day since mid-January.

Not only have a near-record number of power plants been shut down for repairs this month, the hot weather is breaking records and causing energy use to spike. The state would probably be near blackouts even without the shaky financial situation.

But the final insult is that some of the bills are getting paid late, in part because power generators are charging unprecedented rates on the daily energy market.

That causes the people who work at power companies to get snippy sometimes and threaten to withhold power. That also leads to the same things that poor people face every day: higher prices, bad service and frustration.

"We pay more for gasoline. We pay more for natural gas. We pay more for electricity than anywhere else in the country," said Larry Bellnap, shift manager at the ISO, a two-decade veteran in the power business. "I can't think of a reason except we're California, and they are taking advantage of us."

Here's a conversation recorded a few months ago between an ISO engineer and a generating plant in El Segundo. At the time, the ISO needed the plant to go on line immediately to avoid blackouts.

"You need to get somebody that has the authority to tell me how I'm going to get paid," the plant manager demands on the phone.

"I have the authority to order these plants on," the ISO manager says, and then gets this back a few minutes later:

"I still need clarification on how you're going to pay me if I get these things on."

"OK. I can't give you that right now. That will have to wait until tomorrow. "

"No, I need that now," the plant manager says.

"That's unacceptable."

The conversation is contained in court records compiled when several out-of- state generators threatened to cut off power, despite their contracts, and the ISO sued. The state lost its case essentially, but federal regulators backed them up last week in a ruling.

McIntosh said he'd never in his 31 years working in the power industry had to get a lawyer on the phone to force a power generator to start up a plant to provide more power. But now they have two available if needed to remind generators of their commitment.

GALLING POSITION The problem is especially irritating because power generators are charging the highest prices ever seen for power.

McIntosh and others said the situation was much smoother now that California was the major creditor and was pumping billions of dollars into buying power. Most of the generators are confident enough they will get paid.

Hidalgo said the BC Hydro situation this week was isolated so far, but he offered one solution for the future:

"Maybe they shouldn't charge so much."

E-mail Robert Salladay at rsalladay@sfchronicle.com.

-- Martin Thompson (mthom1927@aol.com), May 10, 2001

Answers

I'm glad the generators are glad that California is now stepping in to "assure" that they will be paid.

Boy, have they got a shock coming.

-- JackW (jpayne@webtv.net), May 11, 2001.