San Francisco's top law enforcement official --the City's equivalent of Janet Reno-- is suing major energy suppliers for "conspiring to fix prices" and for "withholding electrical power at critical times in order to artificially boost prices." LIGHTS OUT / Juice cut again; S.F. sues power firms by David Lazarus San Francisco Chronicle, January 18, 2001 The lights went out again throughout Northern California this morning when state officials resumed rolling blackouts to ease pressure on the beleaguered power grid. The blackouts were ordered by the California Independent System Operator, which oversees the electricity network, at 9:50 a.m. Pacific Gas and Electric Co. promptly cut off power to hundreds of thousands of customers in communities stretching from the Central Valley to the Oregon border. At the same time, San Francisco became the first city to sue power producers on behalf of consumers facing blackouts and high electricity bills during the state's energy crisis. San Francisco City Attorney Louise Renne announced today that she is suing 13 major energy suppliers for allegedly conspiring to fix prices and withholding power supply at critical times in order to artificially boost prices. Kellan Fluckiger, the ISO's chief operating officer, said it appeared by midday that conservation efforts were reducing stress on the system, but he was unable to say whether this would be enough to end the blackouts. "We are accessing all available megawatts, but in any hour we have a possibility of rotating blackouts," he said. He added that the blackouts could extend to Southern California by the time demand hits its expected peak around 6 p.m. The northern half of the state experienced its first widespread rolling blackouts yesterday when they were ordered at 11:40 a.m. They were suspended at 1:40 p.m., and a threat of continued problems last night was averted when additional power was obtained from out-of-state generators. Gov. Gray Davis declared a state of emergency late last night and ordered the Department of Water Resources to buy and sell electricity to help alleviate the crisis -- a move that could cost taxpayers $900 million for two weeks worth of power. A state of emergency opens the door for federal assistance in helping California out of the mess, but it was not immediately clear just what Washington could do. Meanwhile, PG&E and its parent company, PG&E Corp., defaulted yesterday on paying $76 million to holders of the company's commercial paper, a form of short-term debt. PG&E said additional bills may go unpaid as a result of the utility's increasingly shaky finances. The suit filed in San Francisco Superior Court seeks to force power companies to return their allegedly ill-gotten profits -- an estimated $1 billion during the year 2000 -- to consumers. "The companies are playing with marked cards," Renne said. "They have a very dim allegiance to their customers. I think consumers know when they are being conned, and this is a clear instance of corporations taking advantage of a deregulated market to make a quick buck." Companies named in the suit include subsidiaries of PG&E. The 13 power generators are Dynegy Power Marketing; ENRON Energy Services; Enron Power Marketing; PG&E Energy Trading; Reliant Energy Services; Sempra Energy Trading; Sempra Energy Resources; Southern Co. Energy Marketing; Williams Energy Marketing and Trading; Williams Energy Services Co.; Duke Energy Trading and Marketing; NRG Energy; and Morgan Stanley Capital Group. As news of San Francisco's lawsuit spread today, consumer groups praised the move. "The problems we're seeing right now have more to do with greed than the power supply," said Mindy Spatt, a spokeswoman for The Utility Reform Network in San Francisco. Terry Winter, chief executive officer of the ISO, blamed the shortage on an unusually high number of power plants idled for maintenance as well as problems with transmission lines that move electricity between Northern and Southern California. U.S. Energy Secretary Bill Richardson responded to the shortfall by extending an emergency order requiring generators to sell excess electricity to California. The order now will stay in effect until Tuesday. Winter said the blackouts were confined to the northern half of the state because power normally provided by generators in Oregon and Washington was unavailable due to lower-than-normal rainfall, which has affected the region's dams. Officials had expected the outages by last night to extend to Southern California, but demand on the grid eased after power use peaked around 6 p.m. PG&E began cutting power to customers around 11:50 a.m., just minutes after the ISO's order for blackouts was issued. The outages affected about 400,000 customers for between 60 and 90 minutes at a time, said Ron Low, a PG&E spokesman. He said blackouts were experienced in San Francisco, the East Bay, the South Bay, along the Peninsula and around Sacramento. "We were able to do this efficiently and quickly," Low said. "This is something that we planned for and practiced for." The utility cannot provide advance warning to customers who will lose power because it must act immediately, as soon as the ISO calls for blackouts. It also keeps the order of affected areas a secret so as not to tip off would-be burglars about where security systems may be on the blink. The ISO called another Stage 3 energy emergency yesterday morning when power reserves fell below 1.5 percent of available capacity. Technicians at PG&E sprang into action as soon as the ISO order for blackouts was issued. In PG&E's case, its 4.5 million customers are divided into 14 blocks, each representing about 550 megawatts of electricity. A megawatt is the power needed to light 1,000 homes. The blocks are laid out according to circuits as opposed to geography, so a neighborhood in San Francisco may lose power at the same time as a neighborhood in San Ramon. Power to each block is cut for about an hour at a time, and the blackout then rolls to the next block until stress on the state's energy grid has been relieved. Blackouts are coordinated among utility technicians and the ISO via the "operations call," or the "ops call" to insiders. It is an open line among key industry players who must remain in constant communication during crises. The ISO's Winter said the system was running smoothly yesterday morning even though as much as 11,000 megawatts of generating capacity -- about a quarter of the system -- was offline for maintenance. Then Duke Energy's Morro Bay plant was shut down because of a technical glitch, and suddenly the power grid faced overload as demand outstripped available supply. "We could see very clearly that we were at the ragged edge," Winter said. The word was quickly passed to PG&E that rolling blackouts were required, while Edison was instructed to stand by in case outages were needed as well in the south. Ron Rodriguez, a BART spokesman, said PG&E assured the rail system that trains would keep running and no one would be stuck in the Transbay tube. BART receives only 4 percent of its power from PG&E and the rest from direct contracts with out-of-state generators. Muni spokesman Alan Siegel said the mass-transit network was caught by surprise when PG&E began its rolling blackouts. But most Muni lines were unaffected. "We get our electricity from our own plant at Hetch Hetchy," Siegel said. "If we know that there is going to be a problem somewhere, we can redirect it from one substation to another, keeping our lines running." He said only the 24 Divisadero line went down yesterday from 1:03 p.m. to 1:20 p.m., although other lines were affected by traffic lights going out. On the financial front, PG&E told the U.S. Securities and Exchange Commission that it would default on $33 million in commercial paper, while the utility's parent company said it would default on $43 million in payments. The Chronicle reported yesterday that defaults were imminent at PG&E after Edison said it would not be able to pay almost $600 million in outstanding payments. Defaults are seen as a first step toward bankruptcy. PG&E's money troubles worsened yesterday when Moody's Investors Service joined Standard & Poor's in downgrading the company's bond rating to junk status. Shawn Cooper, a PG&E spokesman, said yesterday's default may not be the last. "Obviously, this opens up a whole lot of concern," he said. "If things don't improve, we can't make payments on a variety of things." PG&E says it will run out of cash within days because it can no longer secure loans from financial institutions. The utility is saddled with almost $7 billion in debt because of soaring wholesale power rates. PG&E has a $583 million power bill due Feb. 1. Another payment of $431 million is due Feb. 15, followed by a charge for $1.2 billion on March 2. At a hastily called news conference last night, Gov. Davis ordered the the Department of Water Resources to begin buying and selling electricity to "assist in mitigating the effects of this emergency." [Chronicle staff writers Ilene Lelchuk, Malcolm Glover, Greg Lucas and Lynda Gledhill contributed to this report.] _____________________________________________________________ Another stressful day in California electricity market JOHN HOWARD, Associated Press Writer San Francisco Chronicle, January 18, 2001 (01-18) 09:42 PST SACRAMENTO, Calif. (AP) -- Californians faced a second day of random blackouts Thursday as the state stood poised to use its buying power -- and millions of dollars of its cash -- to keep the lights on and money-strapped utilities from going broke. The state Legislature prepared to rush passage Thursday of an emergency bailout plan sought by Gov. Gray Davis to allow the state to buy power and sell it to utilities. Just a minute after midnight, the Independent System Operator, keeper of the state's power grid, declared a Stage 3 alert for California for Thursday. The alert was expected to be in effect all day. "It's almost a carbon coby of yesterday, a little better but not much,'' ISO spokesman Patrick Dorinson said just before dawn Thursday morning. He said the ISO had 75 percent of the power the state needs for the day lined up and is scrambling to find the rest to avoid blackouts. Yesterday, hundreds of thousands of northern and central California residents saw everything from their lights to their heaters, computers and bank machines abruptly switched off during a similar Stage 3 alert, which is called when power reserves approach or fall below 1.5 percent. To try to keep much of the state from going dark again, Davis ordered California's Department of Water Resources to start temporarily buying power from wholesalers and providing it to power-short utilities. "I'm declaring a state of emergency in California,'' the governor intoned during a late-night news conference Wednesday at which he announced the power-buying plan. Energy officials said Thursday could be even more of a difficult day than its predecessor, when people were left in the dark, some trapped in elevators, as power in such cities as San Francisco, Sacramento and Modesto was turned off. Thursday's Stage 3 alert went into effect just two minutes after the Stage 3 alert in effect all day Wednesday was terminated. An unstable market, the Pacific Northwest's own limited supplies of hydroelectric power and myriad other woes meant the state was likely to be searching on the open market for as much as 55 percent of its power during peak use periods Thursday, ISO officials said. To add to potential problems, Pacific Gas and Electric Co. officials say they may have to cut off natural gas supplies to customers this week -- including natural gas-fueled electricity plants, the San Jose Mercury News reported Thursday. "It just adds another level of difficulty,'' the ISO's Dorinson said of the gas threat. In the face of that, Davis signed an emergency order late Wednesday authorizing the state to buy power to fend off both further blackouts and utility bankruptcy, which he said could be imminent without such action. "A state of emergency gives the governor the power to use already budgeted funds to mitigate or eliminate a disaster. And so I am calling on the Department of Water Resources to use funds already budgeted to them to keep the lights on as long as possible,'' he said. "He made no mention of making utilities pay for the power, which could cost taxpayers tens of millions of dollars over the next few days. He also called on the Legislature to authorize a longer-term plan to buy power and provide it to the cash-strapped utilities. If such legislation isn't adopted by Thursday, the governor said, several power suppliers have threatened to call in their debts on California's two largest utilities, Southern California Edison and Pacific Gas and Electric Co., which could force them into bankruptcy. The governor's plan was announced on a day when state regulators imposed afternoon outages in northern and central California and came within 1,300 megawatts -- enough electricity to power 1.3 million homes -- of ordering the first statewide blackouts since World War II. As power was shut off to as many as a half-million customers at a time, automated teller machines along several blocks of downtown San Francisco shut down and at least two students were trapped in an elevator that stopped between floors at the city's Hastings School of Law. The students eventually used a ladder to climb out. Power was kept on at such essential facilities as hospitals and airports. Because of security concerns officials didn't announce in advance where they were turning it off. As the lights went out, some people blamed the utilities, accusing them of cutting power as a ploy to raise rates. "This is happening because the utilities mismanaged their finances. The state ought to just take them over. The bottom line is that this is all about greed,'' said Kenneth Carrero of San Ramon, who voluntarily turned off his computer Wednesday afternoon to conserve energy. Still others blamed the wholesalers who sell power to the utilities. Among them was the city of San Francisco, which said it was preparing a lawsuit accusing power generators of manipulating supplies to keep prices high. The action could be filed as early as Thursday, said Marc Slavin, deputy city attorney. Wholesalers vehemently denied such allegations, as well as Davis' remarks that they were about to force Edison and PG&E into bankruptcy. On Wednesday, PG&E and its parent company missed a $76 million payment due to lenders, the first time it defaulted. Edison defaulted on bills and bond payments totaling $596 million on Tuesday. Despite that, Tom Williams of Duke Energy said suppliers were giving the utilities more time to pay. "But we have bills to pay, too,'' he said. ``We're part of the solution; we're not driving anyone into bankruptcy.'' Under Davis' proposal, emergency legislation would be in effect for a week to 10 days or until lawmakers can pass a measure permanently letting the state enter into long-term contracts with wholesalers to buy power and resell it to utilities, Davis said. The long-term contract legislation, approved earlier this week by the Assembly, would let the state enter long-term contracts with electricity wholesalers to buy power at 5 1/2 cents per kilowatt hour -- about one-fifth the current market rate. The power would be resold to consumers, through the utilities, at the state's cost, plus a modest administrative charge.
