A Power Crisis Wake-Up
The federal government has finally recognized, in the very nick of time, that the electric power crisis in California is an emergency with potential impact on the economies of both the state and the nation. Energy Secretary Bill Richardson forestalled scheduled blackouts Wednesday with threats of federal intervention that persuaded out-of-state power companies to sell to California. The reluctant power firms transmitted enough to keep the lights on and the state’s economic engine rolling for another day.
The next test occurs today, when the Federal Energy Regulatory Commission is scheduled to announce a plan to ease the day-to-day threat of the extraordinary power shortages. Commission Chairman James Hoecker says the commission believes in a competitive market, but one that works within a reasonable price range. The only way to achieve that in the short term is for the federal energy commission to impose price controls regionwide. The agency previously declined to do this, but with the emergency continuing it may now reconsider some kind of cap to prevent energy firms from pitting one state against another in a bidding war for available power.
That was the situation this week as both California and Washington state faced shortages, shooting market prices for power as high as $1,500 per megawatt-hour, compared with $30 just one year ago. Even with higher costs for power plant fuel--primarily natural gas--$1,500 is outrageous. The unregulated producers are reaping massive windfall profits.
California’s two largest utilities, Southern California Edison and Pacific Gas & Electric, are facing financial crises after paying an estimated $7 billion for power since June. Because of statewide caps on rates charged consumers, much of that cost cannot soon be recouped from customers, and the companies’ credit ratings have been battered. Thus the private power companies were refusing Thursday to sell to Edison and PG&E;, saying they feared they would not be paid. The producers relented only after Richardson stepped in. About one-fourth of California’s total supply normally comes from out of state.
The only good news is that Los Angeles is largely exempt from the shortages because its publicly owned power system produces enough energy at reasonable prices for local needs, with some left for sale to the rest of the state.
Energy Secretary Richardson acted Wednesday at the urgent request of Gov. Gray Davis and Sen. Dianne Feinstein (D-Calif.). He should be prepared to do so again if the energy commission fails to produce an adequate short-term remedy for the electric power chaos in the West.
