Roll Back the Dark

California’s electrical power system fell off the cliff Wednesday. Rolling blackouts affected half a million northern and central California customers of the state’s largest utility, Pacific Gas & Electric Co., and more outages were threatened. People trapped in elevators and a traffic mess on city streets brought the crisis home.

With PG&E; and other California private utilities staring at bankruptcy, Gov. Gray Davis declared a state of emergency Wednesday night, which gives him the authority to use state Department of Water Resources funds to buy power. He also called on the Legislature to pass a measure appropriating additional funds to purchase power from generators and resell it either to users or the utilities. The measure would dampen energy price fluctuations and stabilize supply over the near term. It would not, however, solve the chronic shortage of power generation capacity in the West or fix California’s botched electricity deregulation. Much more work--and careful work--is needed to right this sinking ship.

The details of the Legislature’s plan were still being negotiated, but the idea is sound. State utilities, which are not allowed to charge consumers the full cost of electricity bought on the open market, have for all practical purposes gone bust. Power generators can do better financially by selling electricity to out-of-state customers or even by shutting down. The generators have no regulatory obligation to keep California’s lights on and, at this point, only a short-term federal order requiring generators to sell to California has prevented a greater withdrawal of supplies.

A single blackout is mostly an inconvenience. Repeated blackouts pose a real threat to California’s economy.

The legislative plan is to allow the state, with its taxpayer-backed credit, to buy power directly from private generators under a long-term contract. Davis has insisted that the price the state pays should not exceed 5 1/2 cents per kilowatt-hour to avoid consumer rate increases. This is unrealistic. With the current high price of natural gas, the fuel used by most power generators, the competitive price of electricity in today’s market is closer to 10 cents per kilowatt-hour, according to the UC Energy Institute. Power companies might sell at less than that only under contracts for five to 10 years, to recoup lost profits later when prices for natural gas level off and new power plants come on line.

Most California consumers pay roughly 6 cents per kilowatt-hour under regulated prices, so state taxpayers will merely end up subsidizing the price of electricity unless rates go up.

There are no easy choices left, and the Legislature needs to complete its action swiftly. Of course every effort should continue to determine whether producers might have colluded in pricing or in reducing production, but that won’t turn the lights back on.

State purchases will provide immediate relief, buying time for a rigorous energy conservation program to prevent new shortages in the peak-usage summer months. The fate of the state’s private utilities is far from decided. But consumers, with state incentives and encouragement to reduce power use, can go far toward fixing their own problem until new power sources come on line.