A rchive Date
[ 28-01-2001 ]
Category
[ International Relations ]
sub-Categoy
[ U.S ]
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[Power crisis ominous for businesses
However, some California workers take the rolling blackouts in stride
By DAVID IVANOVICH
Copyright 2001 Houston Chronicle Washington Bureau
Jan. 28, 2001, 12:47AM
SAN FRANCISCO - Before heading off for work, commuters in the San Francisco Bay Area now check out the morning weather, traffic and blackout reports.
Office lights are dimmed as businesses try to conserve electricity. Hotel rooms are chilly. Even the city's icon, the Golden Gate Bridge, is shrouded in gloom in the early evening because the decorative lights are kept off until 7pm. to save power. Just days after rolling blackouts plunged much of California into darkness, the state's fragile power grid is limping along.
The state's two most battered utilities, Southern California Edison and Pacific Gas and Electric Co. - or Thelma and Louise, as they've been dubbed by more cynical Californians - have been pulled back from the brink of bankruptcy, at least for now.
The economic damage from rolling blackouts and supply interruptions - to date - has been relatively modest, economists say. It takes more than this to bring down what would be the seventh-largest economy in the world, if California were a separate nation.
But the state's business image has been bludgeoned. For those who live here, the power crisis has quickly become, like earthquakes and cellphones, part of the fabric of life.
It's hard to buy a decent flashlight. Leaving a porch light on is thought downright unpatriotic, and the intricacies of wholesale power marketing have become the stuff of casual dinner conversation over pasta.
Indeed, the crisis has emboldened some to speak the unthinkable: "Electricity is a basic necessity, more basic than the Internet," said Lisa Poelle, who just happens to be a spokeswoman for San Jose, Calif.-based Calpine, a wholesale power producer.
While Californians joke about it, the power crisis could have serious repercussions. Power supplies remain precariously low. Authorities here issue almost daily alerts, admonishing the public to conserve.
The state's political leaders managed to keep the utilities from sliding into bankruptcy court only by allocating $400 million in state funds to purchase power on the utilities' behalf.
Those funds, however, could run out in a matter of days. And the new Bush administration has signaled that California should not expect much help from Washington, even as Federal Reserve Chairman Alan Greenspan warns that economic trouble from California could spill over into the rest of the nation.
After operating at full tilt through the summer and fall, many power plants are off line, as producers repair and maintain their equipment. To get through the last few weeks, utilities have taken advantage of their "interruptible" contracts and shut off power intermittently to large
industrial and commercial customers who had agreed to risk having their power interrupted in exchange for lower rates.
But they are fast reaching the annual limit on interruptions for those customers.
On Wednesday, state officials accepted bids from wholesale power producers to supply electricity to a state agency with a strong credit rating, which in turn sells power to California's troubled utilities. The response has buoyed hopes that a solution can be found. Californians appear to be responding to pleas to curtail their electricity usage.
Sony Pictures turned out the lights on the billboards surrounding its Culver City studio. Now nighttime passers-by must rely on ambient lighting to catch a glimpse of ads for Finding Forrester and The Wedding Planner.
Officials are making another plea for conservation today, when football fans will flip on the big-screen TVs to watch the Super Bowl. Authorities are asking viewers to huddle together to watch the game. Over the last few weeks, the blackouts and supply interruptions have been more irritating than calamitous for most businesses.
Take computer-chip maker Integrated Device Technology. Company officials got a heads-up from the utility that the lights might go out at the company's Salinas, Calif., wafer-making plant. Fearing a cutoff, Integrated Device officials halted production. About 350 to 400 workers sat idle for a few hours. The lights stayed on.
The next day, plant officials got a second call minutes before power went off. Before supervisors had a chance to respond, the lights went out. Company officials had to discard about 200 wafers only partially completed, at a cost of $5,000 to $6,000 in material costs, said Dave C?té, Integrated Device's vice president for worldwide marketing.
Eric Borba owns a dairy farm in Porterville in central California. The lights stayed on at Borba's place, but the Land O'Lakes creamery in Tulare had an interruptible contract. The creamery couldn't take Borba's milk shipment, and he was forced to dump 1,500 gallons of milk.
All told, the rolling blackouts and interrupted service may have cost $1.7 billion in direct and indirect costs, estimates Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
But the effects of the crisis are rippling out past California's borders. Phelps Dodge Corp., the world's second-largest copper producer, operates plants in New Mexico and Arizona.
Phelps Dodge also has interruptible power contracts. There was no supply problem in the company's locations, but the company's power supplier took advantage of Phelps Dodge's interruptible contract to sell power for a much higher price in the California market, Phelps Dodge officials said.
At the same time, the company relies heavily on diesel fuel. And diesel supplies were disrupted when Houston-based Kinder Morgan Energy Partners' products pipeline had to stop shipments because its electric power supply had been interrupted. The company has since resumed normal operations.
For California, the blow to the state's economic prestige may prove more significant than the actual work disruptions.
A perplexed world has watched as California, land of Intel Corp. and DreamWorks, the Palomar Observatory and Silicon Valley, struggled to figure out how to keep the lights on.
Already, Morgan Stanley Dean Witter analysts Joseph Quinlan and Andrea Prochniak have likened the situation in California - rolling blackouts, overdue bills, high credit risks - to conditions in developing nations such as Argentina and Indonesia. That's not exactly the kind of comparison Californians are used to hearing.
The state's political leaders, meanwhile, have done much to give investors pause.
California is relying on wholesale power producers, a number of which are based in Houston, to help pull the state out of the power crunch.
But Davis has branded the out-of-state wholesale power producers as "profiteers" and threatened to seize their plants. The city of San Francisco has filed suit against the power companies, while Sen. Barbara Boxer, D-Calif., has introduced federal legislation aimed at imposing a windfall-profits tax.
California economic planners already must struggle with numerous obstacles that discourage development: high labor costs, astronomical land prices and tough environmental regulations. Now, add an unstable power supply and a confrontational political leadership.
Fast-growing Las Vegas has long benefited from California's barriers to business. A. Somer Hollingsworth, president of the Nevada Development Authority, usually passes on opportunities to lure away businesses after, say, an earthquake or a wildfire. But he's not hesitating now.
"This is a totally different situation," Hollingsworth said. "Some of these people are virtually out of business."
For the average California working stiff, the blackouts serve as a great new excuse for being late to the office, said a laughing Julie Donnelly, a clinic affairs manager for a San Francisco biotech firm.
Colleagues also are beginning to realize just how dependent they've become on electronic gadgetry such as voice mail and e-mail to communicate. "Now you're going over and talking to people," Donnelly said.
And while many people complain about losing computer files, getting stuck in elevators or navigating traffic without working streetlights, most seem to be taking the crisis in stride.
"You're going to have people who do get irritated, and others who say, `Hey! Party!' " Donnelly said.
You have to be flexible to live here.
Meanwhile, power-starved California lurched into Super Bowl weekend under a round-the-clock electricity alert as state officials, utility executives and consumer groups huddled privately Saturday in their ongoing effort to keep the lights on.
The manager of California's electricity grid declared a Stage 3 emergency through the weekend, which means reserves dipped to 1.5 percent or less statewide.
The Independent System Operator said it did not anticipate rolling blackouts during the weekend but urged Californians to keep up conservation efforts, which have had an effect on the state grid estimated at about 1,000 megawatts daily.
 World Fact Book (CIA)]
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