More California power talks due

'Light at the end of the tunnel': Progress reported at energy meeting

In this story: 'All sides gave a bit' Trying to calm Wall Street RELATED STORIES, SITES

From staff and wire reports

WASHINGTON -- California officials and power industry personnel meet again in Washington on Wednesday for technical discussions aimed at bringing stability to the state's troubled electricity system.

Wednesday's "working group" meeting under the direction of the Clinton administration is a follow-up to higher-level talks held overnight to keep two of California's biggest utilities from going broke.

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The seven-hour, closed-door session at the Treasury Department ended shortly after midnight.

The participants -- including California Gov. Gray Davis and Energy Secretary Bill Richardson -- emerged early Wednesday morning to say progress had been made for the short-term financial survival of PG&E Corp.'s Pacific Gas & Electric and Edison International's Southern California Edison Co.

"We can see light at the end of the tunnel," Davis told reporters. Richardson agreed. "Progress was made. All sides gave a bit," he said.

A brief statement was issued saying: "The participants agreed on the need for cooperation to maintain stability and avoid bankruptcy of California utilities."

The nation's most populous state has been pushed to the brink of power blackouts in recent weeks due to tight supplies of electricity.

Davis, who has accused electricity wholesalers of price gouging, said some progress was made to develop greater reliance on long-term contracts for wholesale electricity purchases, keeping down prices. He gave no details.

Under the guidelines for a settlement among the state's utilities, lawmakers, regulators and out-of-state power marketers, the participants agreed to hold follow-up talks.

Davis and Richardson are not expected at Wednesday's session, but this weekend they plan to reconvene with other senior executives and policymakers to finalize an agreement.

The Tuesday night meeting brought together state officials, regulators and legislative leaders; the state's three largest electric utilities; nine of the major power producers and brokers; and the chairman of the Federal Energy Regulatory Commission, which has refused to impose wholesale price controls sought by Davis.

In addition to Richardson, the other top Clinton administration officials at the meeting were Treasury Secretary Lawrence Summers and Gene Sperling, the president's top economic adviser.

Electricity shortages have produced soaring prices and sporadic threats of brownouts in the state since last June. This week Davis called the state's experiment with electricity deregulation a "colossal failure."

The potential economic fallout from California's power problems became more apparent Tuesday when Intel Corp., the world's largest manufacturer of computer chips, announced it would no longer expand its plants or build new ones in the state until the electricity problems -- including sporadic threats of rolling blackouts and soaring prices -- are resolved.

Tuesday's meeting was widely viewed as an attempt to calm concerns on Wall Street and in the banking community about the prospects of two of California's major utilities facing bankruptcy because of cash shortages.

Pacific Gas & Electric and SoCal Edison, which together serve about 25 million people, have teetered near insolvency, accumulating more than $9 billion in losses since June.

The utilities have seen wholesale prices soar fivefold but have not been able to pass on the increases to retail customers because of state restrictions.

Last week, the state public utility commission agreed to a 7 percent to 15 percent rate hike, but the utilities said that was not nearly enough. There was growing concern that power suppliers would no longer sell to the utilities because of fear of not getting paid, one administration official said.

Davis this week called for creation of a new public agency to build more power plants in the state. He renewed his charge that wholesale power generators are price gouging and threatened to seize their assets if they don't stop.

Top executives of several of those generating companies, including Enron, Dynegy and Duke Power, participated in the closed-door session. The power producers have denied price gouging.

Davis and the utilities have been frustrated because federal regulators have refused to put a cap on the wholesale price for electricity and natural gas flowing into California.

The governor "would like federal regulators to step up to the plate and set price caps," said Steve Maviglio, a spokesman for Davis.

The Associated Press contributed to this report.

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