U.S. to Keep Power Coming for 2 Weeks

As Sacramento lawmakers crunched numbers and floated energy proposals Tuesday, the new Bush administration gave California some breathing room, temporarily extending a pair of emergency orders to keep electricity and natural gas flowing to the state.

In addition, the Bush-appointed head of the federal agency that oversees the nation’s wholesale electrical system hinted that he might consider imposing the kind of temporary price caps sought by Gov. Gray Davis, but only in return for steps like big consumer rate hikes that Davis and other state officials have adamantly refused to consider.

Even with these actions, administration officials warned, more trouble is on the way.

“California is going to continue to experience volatility, especially this summer,” Curt L. Hebert Jr., the newly appointed chairman of the Federal Energy Regulatory Commission, said Tuesday. “I predict more rolling blackouts.”

Secretary of Energy Spencer Abraham announced that he will extend emergency orders directing power and natural gas providers to sell to the state’s near-bankrupt utilities for another two weeks. But he and other officials signaled that the extensions are the last that the state can expect from the Republican administration, pointedly noting that Davis has said that is all the time he needs to win approval for a fix to the state’s scrambled utility system.

The now-departed Clinton administration approved a steady stream of emergency orders that protected the state from power cutoffs for the last month. The last of those orders was scheduled to expire only hours after Abraham acted.

“Our action . . . is designed to give the governor, the California Legislature and other relevant parties the time to take necessary action,” Abraham said in announcing his decision.

“I strongly urge the parties to act immediately.”

That’s exactly what frazzled Sacramento officials were trying to do as blackouts again were narrowly averted Tuesday, the eighth consecutive day of Stage 3 power emergencies.

Promising Development

With the crisis mounting, the governor and key legislators have been searching for ways to avert rate hikes for consumers while saving Southern California Edison and Pacific Gas & Electric from sinking further into debt because of high prices charged by electricity wholesalers.

In one of the day’s most promising developments, Assembly Democratic leaders concluded that the state had more leeway in the amount that it could pay for long-term electricity without affecting ratepayers.

Through a series of sensitive negotiations and arcane calculations, officials concluded that they could pay an average of 7.4 cents per kilowatt-hour, rather than the 5.5 cents Davis had insisted upon. The difference may seem small, but it amounts to billions of dollars, some of which could help the utilities chip away at their debt. The average home uses 500 to 600 kilowatt-hours in a month.

Central to the price-setting effort was the opening of an auction Tuesday morning in which power suppliers could submit bids to the state, which has spent tens of millions of dollars in recent days purchasing electricity on behalf of Edison and PG&E.;

But by late evening, there were no takers. Still, Davis administration officials remained confident that they would receive offers by noon today, when the bidding ends.

Executives at some power companies said they intended to submit bids.

But others were taken aback by wording in the request for bids that, according to some firms, suggested that the state might be trying to protect itself from debts it may incur in buying power.

The state’s request for bids, placed on the California Department of Water Resources’ Internet site, includes a caveat that “neither the full faith and credit nor the taxing power of the state of California are or may be pledged for any payment under any agreement resulting from this solicitation.”

A spokesman for Davis said the disclaimer is necessary because lawmakers have not yet written the legislation that allows the state to enter the energy-purchasing business. The Legislature is waiting for bids before it fine tunes the bill that would authorize the purchases.

While many power plant owners refused to say whether they would submit bids, Reliant Energy of Houston, owner of several Southern California generators, definitely will, said spokesman Richard Wheatley.

“If we walk away from the bid process,” he said, “that doesn’t say much about us and our long-term commitment to California.”

Meanwhile, several sources said Davis dislikes another proposal that has been among the most prominent and controversial to surface in recent days--state control of the utilities’ hydroelectric plants. Assemblywoman Carole Migden (D-San Francisco) described the governor as “cool” to the idea.

PG&E; and Southern California Edison issued statements saying that they had no desire to give up their extensive and highly profitable hydroelectric generation.

Assemblyman Fred Keeley (D-Santa Cruz), the driving force behind the plan to take control of the system of dams and turbines, insisted that his idea is still alive. But he said he and other Assembly Democrats are considering other assets, including privately owned transmission lines.

One plan that seems to be gaining some currency in Sacramento is a billing system under which residential ratepayers would be spared higher charges but big users, such as factories and supermarkets, would be hit with sizable increases.

“We are definitely going to move in that direction,” Senate leader John Burton (D-San Francisco) said. “Basically, the big energy users are the ones who pushed for energy deregulation. The equity in this situation is that they have the credit-worthiness and the ability to buy [electricity] directly, where the little guys don’t. It is only fair.”

Davis issued no statement on the proposal, although he has said he adamantly opposes rate hikes.

Revenue from the higher bills for big businesses could be used to help the utilities pay off their debt, which they say hovers around $12 billion, but which some lawmakers say is between $5.5 billion and $7 billion.

Harry Snyder of Consumers Union said the plan to raise rates for large energy users is “a major piece and perhaps the centerpiece of going forward in a sane way.”

“That’s the way to stop a ratepayer revolt in California,” Snyder said, a reference to threats that consumer advocates will push an initiative that might be far more radical.

Large-business representatives first sought deregulation of California’s electricity market in the mid-1990s. On Tuesday, they beseeched politicians not to force them into that dysfunctional, exorbitant market.

Jack Stewart, head of the California Manufacturers and Technology Assn., one of the most influential lobbying groups in Sacramento, called the plan to charge large businesses more for power than residents “absolutely unacceptable.”

A dozen associations of major industries attacked that idea in a letter to Davis and the Legislature, warning that forcing big business to buy its electricity directly from private generators would have “a disastrous effect on the state’s economy.”

Several lawmakers sided with the business argument.

“It would be a job killer,” Assemblyman Roderick Wright (D-Los Angeles) said, predicting that higher energy costs could force some businesses to close.

California is continuing to buy power on an emergency basis until Davis and lawmakers can come up with a longer-term solution. The Legislature last week appropriated $400 million for the purchases.

The Davis administration changed its policy and announced that it would no longer issue daily reports on the amount of power it buys.

But other sources placed Tuesday’s purchases at $29 million, pushing the total to $146 million since the program began last week.

California politicians have also been busy on the federal front.

Abraham’s decision to extend the emergency selling orders followed heavy lobbying by California officials, including three phone calls in 24 hours from Sen. Dianne Feinstein, a letter from Reps. Jerry Lewis (R-Redlands) and Sam Farr (D-Carmel), the Republican and Democratic leaders of the state’s House delegation, and a phone call from Davis.

Besides the orders, the administration, through Hebert, suggested that Washington might be open to a deal that would give Davis the temporary price caps on wholesale power that he wants in return for the political pain of steep rate hikes for California consumers and a drastic easing of environmental rules to speed new power plant construction.

Hebert said he had previously suggested such a “quid pro quo” but was overruled by FERC’s Democratic majority. He suggested that he might again consider such a trade-off. FERC oversees the interstate sale of natural gas and electricity and regulates the country’s energy pipeline and hydroelectric systems.

Blaming the State

For the most part, Hebert, following President Bush, placed blame for California’s problems squarely on its own leaders and said it was up to the state to dig itself out of its hole. He painted a dark picture of the state’s immediate prospects, warning of, among other things:

* Rate hikes: “In an extreme situation--and California is certainly there--ratepayers could pay twice what they are now paying.”

* Tough environmental decisions: “The permitting process [for power plant construction] has to be either sped up or Californians are going to make the affirmative decision they are going to pay astronomical prices for energy for a long time to come.”

* More blackouts: “This summer in California we are left with the fact we are probably going to have some rolling blackouts.”

The comments by Hebert and Abraham reflect an emerging administration strategy of casting California as the poster child for its new energy policy, one that emphasizes oil exploration and drilling as well as extra power plant and pipeline construction, and one that probably would come at the expense of strict environmental rules.

But observers said the remarks reflect the complicated and conflict-filled politics of energy that are likely to play out in the coming months.

Indeed, in extending the emergency orders, Abraham was tugged in two directions.

While California officials lobbied the new energy secretary for help, lawmakers from nearby states warned that a federal order to sell power to California could leave their utilities and ratepayers holding the bag.

Nine House members from Oregon and Washington charged in a letter to Davis that California is not doing enough to resolve the crisis, even as the Northwest lawmakers’ constituents “are conserving energy while seeing their rates jump up to historic levels.”

The lawmakers said that to ensure that their utilities get repaid for federally ordered power sales to California, the state Legislature should either “offer a guarantee of repayment, or the California Public Utilities Commission should adjust rates accordingly.”

In extending the emergency order Tuesday, Abraham sounded similar themes, saying that any action by his department must aid not just California, but also other states in the region.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Power Points

Background

The state Legislature approved electricity deregulation with a unanimous vote in 1996. The move was expected to lower power bills in California by opening up the energy market to competition. Relatively few companies, however, entered that market to sell electricity, giving each that did considerable influence over the price. Meanwhile, demand has increased in recent years, while no major power plants have been built. These factors combined last year to push up the wholesale cost of electricity. But the state’s biggest utilities -- Pacific Gas & Electric and Southern California Edison -- are barred from increasing consumer rates. So the utilities have accumulated billions of dollars in debt and, despite help from the sate, have struggled to buy enough electricity.

Daily Developments

* The ferderal government temporarily extended emergency orders requiring power and natural gas providers to sell to the state’s utilities.

* State officials calculated that they have the ability to pay higher wholesale prices for power than previously thought.

* Some lawmakers are leaning toward charging big businesses higher rates to spare residential customers further hikes.

Verbatim

“California is going to continue to experience volatility, especially this summer. I predict more rolling blackouts.” -- Curt L. Hebert Jr., chairman of the Federal Energy Regulatory Commission.

*

Gosselin and Simon reported from Washington; Morain reported from Sacramento. Times staff writers Nancy Rivera Brooks, Miguel Bustillo, Nancy Vogel and Jenifer Warren also contributed to this story.

*

More Inside

Light Show: West Hollywood is calling for power conservation, but its holiday lights still blaze, A16

Riding It Out: Having weathered its own electricity crisis, San Diego is now an isle of seeming normalcy, A3