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Davis sees ‘light at the end of the tunnel' for energy crisis

January 10, 2001|By Erika Buck , Special to this newspaper

WASHINGTON (MNS) — California Gov. Gray Davis met with Energy Secretary Bill Richardson, other Clinton administration officials and utility executives for seven hours Tuesday night.

Davis said those involved in the meeting made progress in efforts to control California's growing energy crisis, which, despite steep increases elsewhere, has not caused electricity costs to rise in the Imperial Irrigation District thus far.

Davis said the meeting, which ended early today, moved the group closer to a solution, including a plan for California's large deregulated utilities to purchase electricity under long-term contracts.

‘‘The most important thing we accomplished is we could see the light at the end of the tunnel,'' Davis told reporters. ‘‘This problem will never go away unless we can diminish our reliance on the spot market. That is best done through long-term contracts.''


In addition to Davis and Richardson, those at the meeting included Gene Sperling, director of the National Economic Council; Treasury Secretary Lawrence Summers; California state legislators; representatives of Pacific Gas and Electric and Southern California Edison; and energy regulators, marketers and generators.

The Imperial Irrigation District, which supplies power to the Imperial Valley, is one of 30 municipal utility districts in California not affected by deregulation. When California moved to create a deregulated electricity market in 1996, IID chose to remain independent of the statewide power grid. The utility now draws energy from several of its own plants and buys power through long-term contracts with out-of-state suppliers.

‘‘That combination has given us a nice balance between resources to avoid price fluctuations experienced by the others,'' said Ron Hull, an IID spokesman.

IID has monitored the statewide market over the last few years to see if joining the alliance would help stabilize or lower prices, said Hull. But the recent difficulties made joining unlikely. In his annual State of the State speech Monday, Davis called California's deregulation plan ‘‘a colossal and dangerous failure.''

‘‘If that's the case, there's no reason to jump into something that is obviously in need of repair,'' said Hull.

Still, IID customers may see larger electricity bills this summer as a result of rising prices for natural gas, which powers most of California's energy plants. Prices rose sharply from $2.50 per million BTU last summer to over $50 in December when cold weather across most of the county increased demand for natural gas. Prices have since fallen to $12 per million BTU, but are likely to remain high through the summer.

The Imperial Valley's mild winter weather has allowed the area to avoid those high costs, Hull said, but it may become a problem when air conditioners are running at full strength this summer.

‘‘We're kind of in the same boat as the rest of California in that we rely on natural gas to produce power,'' he said.

But California's two largest utilities, PG&E and Southern California Edison, face a more immediate problem: bankruptcy. The utilities have lost $12 billion because they must pay soaring wholesale prices, which recently reached 40 cents per kilowatt hour of electricity, while state price caps allow the utility to charge customers no more than 7.5 cents.

Many of the officials at the meeting will remain in Washington today to continue discussions, although Davis will return to California. The discussions were expected to continue into the weekend to hammer out details of the plan.

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