Energy Squeeze in California

SPENCER MICHELS:

On the outskirts of Tulare in California's vast Central Valley, an edginess was evident in the crowd at the World Ag Expo, billed as the world's largest agricultural show. These farmers and businessmen have experienced the state's electricity crisis more intensely than most other Californians.

FARMER:

We don't got power, we don't got energy, can't milk the cows.

FARMER:

We've got 9,000 baby calves, and with no electricity, no feed.

FARMER:

We just purchased a generator to run our potato shed so that we know that we can get through the potato season in the summer, when we have the real crunch.

SPENCER MICHELS:

At the nearby Dairyland Farms, electricity outages have cost the owners thousands of dollars already. Even though the dairy has a standby generator, when the co-op that processes the milk lost its power, dairymen had to figure out what to do with their milk. Some dumped it, but Bill Van Beek salvaged some of his.

BILL VAN BEEK:

We just keep milking, keep filling the tanks, but the co- op, if they get shut down, they can't process the milk, and if they can't process the milk, they can't pick the milk up here at the farm. We just call the local calf raiser here, and they come and pick it up, and they feed it to the calves, and we get, you know, pennies on the dollar.

SPENCER MICHELS:

Bill Van Beek and his brothers milk nearly 5,000 Holstein cows at this farm and two others. Each cow is milked three times a day, producing ten gallons of milk. While other farming operations slow down in winter, dairies operate 24 hours a day year round, so the crisis has already hit here, and Van Beek says he fears that the power problems will only get worse as summer approaches.

BILL VAN BEEK:

The summertime, it's going to kill us, I think, 'cause that's when all the air conditioners are going and all the… the demand is greater in summertime, much greater, I think.

SPENCER MICHELS:

Van Beek is a member of the Land O'Lakes cooperative, which makes butter, cheese, and yogurt sold nationwide. In Tulare, it operates the largest milk-processing plant in the world, handling almost 90 million gallons of milk a day. The operation, which employs 500 people, uses up to 12 megawatts of electricity, enough to light 12,000 homes, and to keep costs down, it has signed up for interruptible power. That means Southern California Edison can shut Land O'Lakes off with half an hour notice when supplies are low. Alan Pierson is vice president of western dairy operations.

ALAN PIERSON:

We actually had two interruptions of 16-hour duration in a row in the month of January, which caused us extreme problems backing up our milk and inconvenienced dairymen and ended up losing over a million pounds of milk during that one-week period.

SPENCER MICHELS:

Land O'Lakes kept the power on during one blackout period, not wanting to lose its very perishable product, but it had to pay a premium of $70,000 an hour. This facility lost money in January for the first time in years. Now the co-op is investing $2.7 million in a generator that will run on natural gas, hoping to have it in place before summer. But even if that helps his facility, Pierson says the state faces potentially catastrophic problems.

ALAN PIERSON:

It's become increasingly difficult for us dealing with suppliers outside of California, and I think it's going to hurt California's ability to attract business in the future.

SPENCER MICHELS:

To protect business and consumers, California Governor Gray Davis has proposed that the state enter the power business by purchasing transmission lines belonging to the utilities.

GOV. GRAY DAVIS:

The state will buy the transmission lines, and it will give the utilities a methodology of financing their debt and making payment to their many creditors, to generators, and the suppliers of renewable energy.

SPENCER MICHELS:

For the state the buy transmission lines, the federal government would have to approve, and there is some reluctance reported. Republicans in the legislature are not in favor of the move either.

SPOKESMAN:

You know, deregulation really didn't get us into this mess, and re-regulation isn't going to get us out of it.

SPENCER MICHELS:

Meanwhile, Democrats, a majority in the state Senate, have approved a bill setting up a state power authority so the state government can finance and own power plants. While Republicans are opposed, consumer advocates have been pushing that idea. Jamie Court is executive director of the Foundation For Taxpayer and Consumer Rights.

JAMIE COURT:

What the state could do is simply get into the energy business by creating one large statewide utility, much like a municipal utility, buy the available power plants– and, by the way, at very cheap prices because the companies are going to be in bankruptcy.

SPENCER MICHELS:

But many farmers and businessmen distrust state involvement in the energy business. Chuck Nichols runs a pistachio nut farm and processing plant in Hanford, California.

CHARLES NICHOLS:

They need to have a role in getting the state out of the mess they've been in, but it… ownership of those assets I don't think is the right thing.

SPENCER MICHELS:

Does that come from a sort of a basic belief in free enterprise on your part?

CHARLES NICHOLS:

Yes. [Laughs] and I think you'll find that throughout agriculture in California.

SPENCER MICHELS:

Nichols grows and harvests pistachios as well as almonds. California's relatively new pistachio industry competes with growers from the Middle East. His processing operation is entirely dependent on electricity and natural gas, which is used to dry the nuts. Natural gas prices have nearly tripled for him. In three weeks in September, his entire pistachio nut crop must be harvested and processed. Last year he spent $600,000 on electricity alone. A power blackout during the harvest, he says, would be devastating for him, and he doesn't think generating his own power is feasible or affordable.

CHARLES NICHOLS:

At this point, we really don't know what to do. You know, some alternatives would be to switch our Ag pumps to diesel engines, but that's a very expensive process, and it couldn't be accomplished. In addition there's, there are air-pollution considerations to go out and do that. You can't just freely go out and do it.

SPENCER MICHELS:

Throughout California, most pumping of ground water for agriculture is dependent on electricity. Some farmers are considering diesel engines, but most say the crisis seriously threatens some of their crops.

CHARLES NICHOLS:

In some crops, in some cases, if you miss an irrigation even by a day or two or three days, you may lose 20 percent or 30 percent of the yield from that crop for the whole year.

SPENCER MICHELS:

Farmers say they fear the government isn't paying much attention to their unique needs at this time of crisis. Back at the World Ag Expo, Mark Watte, a cotton farmer and past chairman of the show, has been working to get the ear of politicians.

MARK WATTE:

Let's be honest. Where are the votes? They're in the big city. And so we're a fly-over area. We are the economic engine that runs this state, but the… we don't have the votes, and so what we really need, we need to get… this situation needs to even get worse, much worse, so where we get their attention and things will… we'll get some action.

SPENCER MICHELS:

Large electricity users have set their lobbyists in motion to look after their interests, as the legislature shapes the next moves in dealing with the energy crisis.

JIM LEHRER:

Just today, rolling blackouts in California shut down the Nichols' pistachio operation.