Western governors, Bush team hold electricity summit

California governor signs bill to buy power for utilities

In this story: California's 'dysfunctional' market Short-term solutions, long-term plan Federal task force Utilities blame deregulation 'Pig in a poke' RELATED STORIES, SITES

From staff and wire reports

VIDEO California Gov. Gray Davis announces his plan to conserve energy Play video (QuickTime, Real or Windows Media)     IN-DEPTH SPECIAL Online coverage of the energy crunch in California   ALSO TIME.com: Bush to California: Thanks for the Urgency   MESSAGE BOARD Power crisis

PORTLAND, Oregon -- Bush administration officials met Friday in Portland, Oregon, with Western governors who said that California's electricity shortage is harming their power systems.

The conference came a day after California Gov. Gray Davis signed into law a $10 billion bill aimed at avoiding possible rolling blackouts while lawmakers try to devise a permanent solution to the state's spiraling energy crisis.

Representatives of the energy industry and members of Congress also attended the Portland meeting, which began on Thursday.

Oregon Gov. John Kitzhaber, the host of the Western Governors' Association energy conference, blamed "flawed" deregulation for rising electricity prices.

"I support energy deregulation that supports market prices," Kitzhaber said, "but it's increasingly untenable."

Kitzhaber said increased electricity production is vital, but he warned the environment must be preserved in the rush to build new power plants.

"Sacrificing environmental quality or despoiling pristine wilderness is not required to ensure our energy future," Kitzhaber said.

California's 'dysfunctional' market

Other Western leaders joined U.S. Energy Secretary Spencer Abraham in warning that an energy shortage is a security threat.

If a solution to California's "dysfunctional" market is not found soon, the entire West could be in jeopardy when electricity use soars with sweltering summer temperatures, former U.S. Sen. J. Bennett Johnston cautioned Thursday night.

"Where in the world is that electricity going to come from? I think you're going to be short," said Johnston, architect of the 1992 Energy Policy Act, the nation's last comprehensive energy law.

The California law, which took effect immediately, allows the state to sign long-term power contracts for up to a decade and sell electricity to customers of cash-strapped Southern California Edison and Pacific Gas and Electric Co.

SoCal Edison and PG&E, California's largest utilities, together serve nearly 9 million residential and business customers.

"I think Gov. Davis has taken the kind of action that needed to be taken in California, and when they act in California that will have an impact on the rest of the region," Abraham told the panel on Friday.

Short-term solutions, long-term plan

The governors, representing nine Western states, said they hoped to emerge from energy policy meetings with short-term solutions to their states' electricity shortages and a long-term plan for coping with increasing energy demand.

Among the issues likely to take center stage: promoting conservation, increasing reliance on renewable resources, such as wind and water, and capping soaring wholesale electricity prices, a technique favored by many governors but opposed by the Bush administration.

The governors are from Oregon, Washington, Wyoming, Montana, Nevada, Utah, Idaho, Arizona and Alaska.

Federal task force

Abraham mentioned a federal task force created by the Bush administration aimed at easing prices and increasing the electricity supply in California and other Western states. Fears run high in the region that the crisis threatens to undermine an already sluggish national economy.

California Gov. Davis is using a three-pronged strategy to attack the state's power crisis

"As Gov. Davis and I were talking about this morning, in fact he alluded to it, we're going to be look at what the federal government can do in terms of demand," Abraham said.

"We recognize the interdepartmental nature of the way the federal government addresses these issues," Abraham told the conference. "We'll look at this across the board. The vice president is the right person to bring together all of the different Cabinet agencies and departments for that effort, but we don't start with any preconceived set of proposals."

California was in its 18th straight day of a so-called Stage 3 alert Friday as power reserves hovered around 1.5 percent. Shortages caused rolling blackouts in northern and central California during two days in January.

Utilities blame deregulation

The utilities say they've been pushed more than $12.7 billion into debt by California's 1996 deregulation law. The law required utilities to sell off power plants and blocked them from recovering higher wholesale electricity costs from customers.

The state has already spent more than $400 million since mid-January buying power for the utilities, which cannot secure credit and are defaulting on hundreds of millions of dollars in bills.

Several lawmakers criticized a provision in the new California law that allows the Public Utilities Commission to raise rates to repay the state for power purchases.

Residential customers who use 30 percent more energy than a baseline specified by regional energy use would face higher rates.

'Pig in a poke'

"This is a pig in a poke," said GOP Assemblyman Rod Pacheco, who voted against the California bill. "It is an unlimited rate increase and there's no question about that."

Separately, Davis issued an executive order that requires California retailers to substantially reduce outdoor lighting during non-business hours or risk $1,000 daily fines. The order takes effect March 15.

The legislation lets the state spend up to $500 million buying more electricity on the expensive spot market while reaching cheaper long-term deals with power wholesalers.

PG&E told the Securities and Exchange Commission on Thursday that it cannot pay more than $1 billion owed for power bought on the open market and sold at lower, regulated prices.

SoCal Edison is expected to make a similar SEC filing Friday.

The Associated Press contributed to this report.

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