Californian Governor declares state of emergency

Sky-rocketing electricity prices set by the electricity generating companies in the country’s richest state resulting from the industry’s deregulation in 1998, have led to the near bankruptcy of the state’s two main electricity utilities. As part of the deregulation package, the two utilities, the Pacific Gas and Electric Company (PG&E), and Southern California Edison (SCE), have not been permitted to raise customers’ prices in order to keep up with their own costs.

On 17 January, the California Independent System Operation (CAISO) ordered PG&E to begin rotating power cuts in Northern California in order to maintain electricity for essential services. The blackouts – which will include facilities such as traffic lights – are each expected to last for no longer than 90 minutes, and authorities are warning the public to be careful during these times.

Operating reserves have now fallen below one and a half percent in Northern California, says CAISO, and the organisation has required PG&E to reduce demand by 400 megawatts. Municipal utilities and irrigation districts in Northern California have also been ordered to reduce demand by 100 megawatts.

SCE announced on 16 January that in order to conserve its finances and to maintain service for its 11 million customers in Southern California, the company has temporarily suspended its debt repayment. Cost-cutting measures include a reduction of up to 1,850 jobs. The company says that it currently has cash reserves of $1,196 billion, which would be gone by 2 February if payments are made when they are due.

By declaring the state of emergency, the Governor has given himself the power to use already budgeted funds to mitigate or eliminate the crisis. “I am also calling on the Legislature to appropriate additional general fund monies to keep the lights on for a week to ten days,” said Davis at a press conference on 17 January. He reported that he had held discussions with the four principal electricity generators in California, who had intended to pull down the two utilities into bankruptcy.

The California Public Utilities Commission is disturbed at the lack of power that they have over the state’s electricity generators. “Those generators making windfall profits at present have no incentive to curb their behaviour,” said Commissioner Richard A Bilas. “After long reflection, I must conclude that the surest way out of this dilemma is for the Legislature to immediately establish a California Power Authority to set the rules of the game and to have the power of condemnation at fair market value over in state generation. Calls for behaviour modification have not worked. Action must be taken.”

Meanwhile, consumer groups are concerned that the costs of the crisis by the state’s citizens. According to the Foundation for Taxpayer and Consumer Rights, the rescue package worked out by Governor Davis will mean that Californian ratepayers will have to pay out an additional $10 million.