Extra Buzz Beat: Living in the Dark: California faces a power crisis.

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Power to the People
February 7, 2001

California: land of sunshine, movie stars and rolling blackouts. Unlike power failures caused by earthquakes or storms, California's short blackouts are planned. In recent months, the state has run desperately short of electricity, and authorities have turned to power rationing. That means no night games for outdoor youth sports, and fines for businesses that don't turn off outdoor lights after hours. Californians have been urged to do their laundry at night, when demand for power goes down.

Power To The People

How did California get into this mess? Until recently, two companies created and delivered all the state's electricity with relatively few problems. But the government decided that Southern California Edison and Pacific Gas Electric (PG&E) and were monopolizing the energy market in the state. To open up the market to competition, the state legislature passed a law in 1996 that deregulated the industry.

The idea was to allow customers to shop for an electricity supplier the same way they shop for long distance phone service. As competing companies tried to lure customers, prices would go down.

Or so they thought. Instead, the opposite happened.

No More Juice

The deregulation law required California utility companies to sell off its power generating plants and just stick to the delivery business. They still own thousands of miles of power lines, but have to buy the electricity itself wholesale from generating companies.

In the past few months, wholesale power costs have skyrocketed to more than 10 times the normal price. That means utilities have to pay high prices to buy electricity. But under state law, they can't raise retail prices to customers.

The California legislature put price caps on the amount customers can be charged. So while customers' electric bills have gone up noticeably, the higher prices don't even begin to cover the wholesale cost to the utility.

Now the state's two major utilities are nearly bankrupt, while power generators enjoy big profits.

Because California has relatively few generators, utilities have had to buy power from companies outside the state, mostly in Oregon and Nevada but sometimes as far away as Iowa.

Now, the out-of-state companies that sold power to California do not want to anymore, out fear of not being paid.

Meanwhile several of those out of state companies, because an executive order said they had to sell power to California, are experiencing power shortages of their own.

Keeping the lights on

California's problems weren't just related to deregulation. California’s need for energy has grown by as much 30 percent while the state’s energy production has grown less than 10 percent. Existing generators are old and new ones were slow to be built. Result: not enough electricity to go around.

Twenty-three states have enacted legislation to deregulate electricity, and 16 others are thinking about it. But California was one of the first, and has become a warning to other states. The problem, experts say, isn't deregulation itself, it's the details of how it's implemented. Some states, including Pennsylvania, have deregulated with apparent success (and no rolling blackouts.)

But California's problems have lots of people worried.

"I think it's pretty clear that America's national security, as well as its economic security, is dependent on its energy security,'' said Energy Secretary Spencer Abraham.

During his first week in office, President Bush ordered out-of-state generators to sell power to California. It gave California two weeks of extra power, but the president made it clear that the extension would be the last.

President Bush has said he's worried about the California crisis -- and the damage it could do to the nation's economy -- but is reluctant to intervene in what he considers a state problem.

It looks like the California crisis is not going away. In fact, energy experts predict the problem will spread through the West. And this summer, crunches could hit places like Boston and New York. Bush has set up a task force to deal with short and long term energy issues.

In the meantime, California Governor Gray Davis signed a $10 billion package letting the state buy power for the bankrupt utility companies. While that helps, everyone agrees it won't fix California electricity woes, and air conditioner season is right around the corner.

--parts of this story were contributed by: Mark R. Moss, Environmental Education Consultant

What do you think? Should the government limit how much power people can use?