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June 9, 2001

10,000 Plead to Be Exempt From Blackouts

By LAURA M. HOLSON

OS ANGELES, June 8 — The jockeying has begun among California businesses desperate to avoid blackouts this summer.

More than 10,000 requests for exemptions have poured into the state's Public Utilities Commission in recent days, as businesses — from oil refiners to farmers to drug makers — lobby for relief from the hundreds of hours of darkness that experts predict California will experience if the state's energy crisis worsens.

The commission has hired a consulting firm to help evaluate the applications. But few executives are likely to be satisfied with the results.

"In a way, the whole process is scary, because what this is ultimately about is telling people no," said Carl Wood, the utilities commissioner in charge of the process. "I argued with a lot of people whether we should go down this road. It is going to be messy."

Already, about 40 percent of consumers and businesses are exempt from blackouts, because they are hooked up to the same portions of the electric grid that serve operations deemed essential to health and safety, like hospitals and fire stations.

That leaves regulators little room to maneuver. The demands of grid management mean the state needs to be free to cut the power of at least 50 percent of all users.

How to choose? One criterion the commission has rejected is economic impact. "Everyone has a case for that," Mr. Wood said. The commission will also not consider claims that blackouts would inconvenience companies or their customers.

Some businesses have turned elsewhere for relief. The California Senate passed a bill Thursday that would let Universal Studios and its theme park switch power providers, from the beleaguered Southern California Edison to the more reliable Los Angeles Department of Water and Power.

Several months ago, the Public Utilities Commission said oil refineries would not be exempt from rotating blackouts, despite a recommendation otherwise from the state energy commission. Refiners have also asked the Legislature to intervene.

Last week, David J. O'Reilly, chairman and chief executive of the Chevron Corporation, sent a letter to Gov. Gray Davis warning him of the economic damage that would befall the state if oil refineries were not exempted. Gasoline prices, already as high as $2 a gallon here, could go higher, Chevron executives have said, and fuel for airplanes and machinery could be in short supply.

On Thursday, Governor Davis sent a letter of his own to the utilities commission, requesting that the refiners get their waiver.

Everyone seems to be asking for favorable treatment these days. Pharmaceutical companies have complained that sudden power outages can play havoc with sensitive technical equipment that takes days to reset, slowing medical tests and trials on important drugs. Farmers in the Central Valley have said their crops will wither and animals die without the electricity to pump water. And that, they said, will raise prices at the grocery store.

"It reflects the reality that a reliable electric supply is an essential underpinning of modern society," Mr. Wood said of the exemption requests.

It was the state's biggest industrial users of electricity — including oil refiners and farmers — who pushed hardest for deregulation in the mid- 1990's, hungry for the lower prices they thought would result.

"The bottom line is deregulation did not work out the way people thought," said Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation. "The issue used to be about high prices. Now it's about reliability."

The Public Utilities Commission has begun releasing the names of those seeking relief — from dentists to catering companies, pet hospitals to beauty salons, and churches, as well. The consulting firm will review the applications, and it may be early August, when summer is half over, before any exemptions are granted.

Mr. Wood said the requests being submitted "are all going to have good stories."

"All we are talking about is degrees," he said.

http://www.nytimes.com/2001/06/09/business/09BLAC.html?pagewanted=print

-- Martin Thompson (mthom1927@aol.com), June 09, 2001

Answers

I will be inconvenienced too. I wonder if I should apply for an exemption.

-- Big Cheese (bigcheeese@multimax.net), June 10, 2001.

I believe the criterion for exemption should be: Minimization of cascading infrastructure disruption effects. Since oil refineries and water/sewage treatment plants are not exempt, this criterion is not being applied. Hence, the cascading effects will be more severe than they need be. It is hoped the recent "letup" is due to Y2K embedded systems being fixed, so the issue becomes at least largely moot. But don't count on this just yet.

-- Robert Riggs (rxr.999@worldnet.att.net), June 10, 2001.