Stage 3 alert to last through Friday

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From staff and wire reports

SACRAMENTO, California -- After a brief respite, California's electricity supply fell to a dangerously low level again Friday, causing officials to issue another Stage 3 alert, meaning that forced blackouts were again possible.

State officials had lifted the alert just before midnight on Thursday, the first relief from alert status in almost two weeks. But when a small northern California power plant went down early Friday, the California Independent System Operator, which manages the state's power grid, reinstated the Stage 3 alert at around 4:30 a.m.

IN-DEPTH SPECIAL Online coverage of the energy crunch in California

The ISO anticipated the Stage 3 alert to continue through midnight Friday.

"We still anticipate being able to avoid rotating blackouts; however, conservation is even more critical," said Stephanie McCorkle, spokeswoman for the ISO

California power managers have called on residents to do everything they can to conserve, even suggesting people planning to watch Sunday night's Super Bowl do so in groups. Television use most likely will surge during the Baltimore Ravens-New York Giants championship football match.

The return to Stage 3 alert came as lawmakers struggled to find a solution to the state's energy crisis, which Federal Reserve Chairman Alan Greenspan warned Thursday could eventually undermine the U.S. economy and its decade-long expansion. The lawmakers prepared on Friday to work through the weekend to find a long-term solution to the crisis.

Thurday's Stage 3 alert, which means power reserves are dangerously low -- 1.5 percent of demand -- was lifted about a minute before Friday began. It had been replaced for about four-and-a-half hours by a Stage 2 alert.

Reserves in Northern California dipped for a short time when a 260-megawatt plant went off line, Independent Systems Operator spokesman Patrick Dorinson said. While reserves were above 1.5 percent later in the morning, "we have to stay in a Stage 3 alert to get the assistance" from Northwest power agencies. The plant was expected back on Friday afternoon.

"We're doing our level best, there are forces in play over which we don't have control now, the form of deregulation that California passed five years ago," Gov. Gray Davis told CNN. "But everyone is working very hard: the generators, utilities, consumers, legislators, Republicans and Democrats."

California's two biggest utilities are about $12 billion in debt, a situation they blame on the state's 1996 deregulation of the energy industry. Under deregulation they were required to shed their power-generating operations and buy electricity from wholesalers, but not allowed to raise rates when prices spiraled upward in a tight market.

With electricity in short supply, Southern California Edison and Pacific Gas and Electric Co. have been forced to buy at the last minute, sometimes paying as much as $600 a megawatt.

The ISO, which controls most of the state's power grid credited conservation efforts so far.

"California's conservation efforts played an important role in the ISO's ability to keep the lights on this week," the ISO said in a statement.

As much as 1,000 megawatts of electricity -- enough to power 1 million homes -- were saved each day this week.

"Stabilization, conservation, generation," Davis said. "We've gone a long way to stabilize the first, to stabilize prices, to make sure there's a credit-worthy purchaser out there in the market, namely in the Department of Water Resources at the state level, buying the power that California needs, and at a rate that people can afford."

The good news could be coming just in time. Greenspan warned Thursday that if the state's energy crisis isn't resolved soon, it could affect the U.S. economy and undermine the nation's decade-long expansion.

"It's scarcely credible that you can have a major economic problem in California which does not feed to the rest of the 49 states," Greenspan said in congressional testimony. He said the crisis could reduce investment in the West, which in turn could shake consumer confidence.

Last week, in the midst of a record 10 straight days of Stage 3 alerts, power was temporarily shut off to hundreds of thousands of customers in central and northern California on two consecutive days.

The legislators trying to fix the crisis were focusing on a plan under which California would issue bonds to cover the multibillion-dollar debts of its two biggest electric utilities. The utilities' customers would pay the money back through recently approved rate increases of between 7 percent and 15 percent, which would be kept in force for more than 10 years.

One of the state's most prominent consumer activists denounced the plan as a bailout.

"If that's what they plan to do, they'll have to contend with a ratepayer revolt at the ballot box in 2002," said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights.

"It's not a bailout," Davis said. "It accomplishes two purposes: It provides the funding to revitalize the utilities, but it lets ratepayers know they will gain as the utilities gain."

In exchange for issuing the revenue bonds, California would be granted long-term options allowing the state to buy low-priced stock in the utilities. If the price were to go up, the state could sell the stock and use the profits to help pay off the bonds. The utilities declined to comment on the proposal.

The Associated Press contributed to this report.

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  • Deregulation - What this means to you - Electricity Market Issues
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