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Bush Does Not Extend Emergency Assistance.

A federal court stepped in to order that the Houston-based Reliant Energy Services Inc. (Reliant) continue to sell power to California just hours before the expiration of a federal emergency order requiring energy wholesalers to sell power to California. Reliant, which supplies 5 percent of California power, was acting under the federal emergency ordered by Energy Secretary Spencer Abraham two weeks ago. Two other electricity suppliers, AES Pacific Inc. and Dynegy Power Corp. announced that they, too, would continue to supply power.

U.S. District Judge Frank Damrell ordered this move in an effort to avoid "obvious, irreparable harm to the public." State officials were concerned that losing power supply could have produced more rolling blackouts.

President George W. Bush had already said his administration would not renew the federal emergency orders, which were first issued by the Clinton Administration and were extended by the Bush Administration.

California Tries To Bail Itself Out of a Crisis

On February 7, California Governor Gray Davis signed into law a bill that would let a state agency buy power under long-term contracts. The law also provides that California sell $10 billion in revenue bonds to raise money to pay for power purchased under those deals. The bonds are to be paid off through current electric rates charged to customers over time. Additionally, the law allots almost $500 million from the state reserves to be spent immediately, prior to the sale of the bonds.

The bill passed only after a dramatic rejection of a previous bill by the California Assembly, which included most of what has been enacted into law. In what was described as party-line vote, the bill fell three votes short of the two thirds needed to send it to the governor. Republicans objected to a provision in the bill that would have authorized the state Public Utilities Commission (PUC) to raise electricity rates for consumers who use more than 30 percent more energy than the established baseline amount.

In an unprecedented move, Governor Davis used emergency powers to seize the assets of the state's two largest utilities. On Monday, February 5, the state claimed ownership of $150 million of power from Pacific Gas and Electric Company (PG&E). Earlier, Governor Davis seized $300 million of Southern California Edison contracts. "By acting today we have preserved attractive prices for California consumers," Davis said.

Governor Davis' drastic moves come after he ordered businesses to reduce lighting after hours by 50 percent or risk hefty fines. In addition, the Governor has proposed new funding aimed at encouraging businesses to install energy management systems and consumers to replace their old appliances with new energy efficient models.

Despite these measures, California's electricity crisis is still subject to flasher woes because of its aging and overtaxed electric transmission line system. Although long-term contracts and conservation efforts may alleviate the immediate electricity problem, California's transmission line, which is 26,000 miles long, has not been upgraded to improve services to the state's 34 million residents. The transmission lines have faced real challenges to supply power this winter.

Analysts have forecasted that the electricity crisis will worsen with the summer's use of air conditioners and refrigeration. Although Northern California plans to operate two new plants late this summer, many critics say it is too little too late. The Independent System Operator (ISO), which monitors the lines on the state's grid, said California was under a Stage 3 alert and has been under such an alert for four consecutive weeks.

On February 2, California Senate Leader John Burton (D-San Francisco) announced that he will push legislation that will allow the state to take over the electric transmission lines in exchange for helping the utilities avoid bankruptcy declarations. The Republican leader in the California Legislature, Bill Campbell, rejected the proposal arguing that the state "has no experience managing high voltage transmission lines." PG&E and Edison disapproved of the idea and expressed no interest in divesting their assets.

At the local level, California counties and cities are taking matters into their own hands. San Diego County Supervisors announced last month they would lobby the California Legislature to allow them to create a municipal utility district. However, the San Diego Gas & Electric Company said it would fight any effort by the county to take over its power lines. Meanwhile, public power advocates in San Francisco are organizing to place an initiative on the November ballot that would call for the creation of a municipal utility district.

Washington Takes Notice

Witnesses at a January 31st hearing before the Senate Energy & Natural Resources Committee, testified that California's electricity crisis is not a state problem, but a regional one. Chairman Frank Murkowski (R-Alaska) remarked that he was disturbed that the crisis has resulted in 30 to 50 percent rate increases in Oregon and Washington. Indeed, just two days prior, Federal Reserve Chairman Alan Greenspan warned the Senate, since California is responsible for almost one-sixth of the nation's economy, it is not unreasonable to conclude that the state's energy crisis could have a nationwide impact.

Essentially, the 16 witnesses at the hearing representing academia, the financial services industry, government agencies, and the affected utilities, all agreed that more long-term contracting, reduction in demand, the building of new generators and transmission lines, and expedited review of plant sites and lines would resolve California's crisis.

The expert witnesses also forecasted that this summer cities like New York, Boston, and San Francisco will experience the same fate as the State of California because of outdated transmission lines.

Bush Creates New Task Force

Next week, it is anticipated that Senator Murkowski will propose broad-based energy legislation that will also include some electric industry related measures.

In the meantime, President Bush named Vice President Cheney to head a cabinet-level task force to develop a national energy policy. The task force will include the secretaries of Energy, Agriculture, Commerce, Interior, Transportation and Treasury.

Christine Todd Whitman, the new administrator of the Environmental Protection Agency, will also be part of this task force. While the task force is likely to focus on domestic oil drilling, President Bush did say that the group would look at short-term solutions to the electricity problem of the Western states. "We're very aware ... that the situation in California is beginning to affect neighboring states," said Bush.
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Title Annotation:George W. Bush; federal emergency order requiring energy wholesalers to sell power to California
Author:Pluviose-Fenton, Veronique
Publication:Nation's Cities Weekly
Date:Feb 12, 2001
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