SPENCER MICHELS: Folsom, California, an old gold-mining town in the foothills East of Sacramento that wears its history on its main street, and at this old powerhouse, where high-voltage electricity was transmitted for the first time in the country in 1895. It is an unlikely setting for the heart of California's troubled 21st century electricity grid. This is the control room of the California independent system operator, Cal ISO, a nonprofit corporation created by the state legislature in 1996 as part of the deregulation of electricity.
SPOKESMAN: No I haven't. As soon as I'm done talking to you, I was going to call PG&E Gas.
SPENCER MICHELS: This is where technicians monitor how much power California needs on a minute-to-minute basis, and how much electricity is available. This is where they see major shortages developing, and where they try to find power, wherever it may be. Ed Riley, director of grid operations, can hear trouble coming.
ED RILEY: First off, it gets very quiet in here. The more serious the situation, the less noise in the room, because everybody's concentrating and they don't want any kind of miscommunication to happen, so they get real quiet.
SPENCER MICHELS: When reserves are low, and demand is about to about to outstrip supply, Riley and his staff follow prescribed rules for ordering utilities to shut off the power to millions of Californians. Last week and once in December, they almost pulled the plug because they could see that demand was high and supplies were nearly gone.
ED RILEY: We were within a few minutes of doing that on December 7.
SPENCER MICHELS: Because?
ED RILEY: Because our reserve margin was very small. We were scouring the whole western United States for additional megawatts, additional power, and couldn't find any. And at the very last minute, Bonneville Power came in with a slug of schedules in from the North, and helped us out.
SPENCER MICHELS: A megawatt is the amount of power it takes to light a thousand homes. Because of increased demand in a fast-growing state and the lack of new power plant construction, California has had a hard time buying enough megawatts from power generators. The shortage has forced prices up. The utility companies claim they are on the verge of bankruptcy since they can't pass costs on to consumers under the deregulation law. The shortages and the high prices force the ISO to scramble, searching for power, sometimes quietly using another state agency or a private company to buy the power the state needs.
ED RILEY: When we try to buy power, people tell us no, and then we... when we ask a third party to get involved in the deal, all of a sudden the megawatts start flowing again. So the megawatts are out there; they just don't want to do business with California right now.
SPENCER MICHELS: Because they think they can make more money elsewhere?
ED RILEY: I don't think so. I think they're concerned about the financial stability of the utilities in California.
SPENCER MICHELS: They don't think they'll get paid, in other words?
ED RILEY: That's correct.
SPENCER MICHELS: In the control room, workers monitor 85% of California's power needs and resources. Cal ISO was not designed to buy much power except in emergencies. The utilities usually did that. But these days, on a minute-to- minute basis, the ISO is buying 25% to 35% of the state's electricity at very high prices. It flows over transmission lines the ISO manages to the utilities, who are billed for it.
SPOKESMAN: Do you have power market available on your hydro? Yeah, right now.
SPENCER MICHELS: Jim Fee, the lead generation dispatcher, says the urgency of buying electricity is obvious to the staff, some of whom have developed high blood pressure.
JIM FEE: It's always tense, but you just have to get the emotions out and just focus on the task at hand and coordinate all the resources available.
SPENCER MICHELS: Last week his team issued a stage three alert, meaning there was almost no reserve, and blackouts were imminent.
JIM FEE: Well, I was really concerned. You know, there was a point where I wasn't sure that we were going to make it without dropping firm load. And fortunately we were able to, you know, obtain enough energy to get us through in the morning.
SPENCER MICHELS: But that probably won't always be the case. Two or three times every day, Cal ISO Leaders like chief operating officer Kellan Fluckiger brief the press, mostly via telephone, on the threat of rolling blackouts, where a succession of cities or neighborhoods lose power for 90 minutes, to reduce the load. But the larger picture gets attention too.
KELLAN FLUCKIGER: I don't believe we'll actually get light at the end of this tunnel for about two years. And that is assuming that the plants that are all scheduled to be built all over the place get done. So I expect to be in a crunch through the summer of 2002.
SPENCER MICHELS: Fluckiger says the public must conserve energy, at least for now.
KELLAN FLUCKIGER: You kind of have a public policy atmosphere that says everyone is entitled to electricity and entitled to it at an affordable price. I don't take issue with that public policy, but certainly don't have the electrical infrastructure to make that a reality right now. And so we've got to create more infrastructure, i.e., power plants, or we've got to do some conservation and decide that during peak times, we change our usage pattern.
SPENCER MICHELS: On the few times when power outages were threatened, Californians did reduce consumption, and it helped. But the state's energy woes, which usually surface during hot summers, are far from over.
ED RILEY: We went through this every day almost during the summer period. We had a very brief break in the first part of November, and then we started doing this again. And one of the generation dispatchers says to me, with a very straight face, he says, "I thought summer was over." This seems like the endless summer for us.
SPENCER MICHELS: This weekend, California Governor Gray Davis, meeting with utility representatives and other officials, hammered out an agreement for the state to buy power for long periods at fixed rates and sell it to the utilities. The legislature will consider the plan Tuesday. That could ease the power crisis, though all sides agree it will take new sources of electricity to meet California's needs.