California Sounds Power Alert

Officials at the California Independent System Operator (Cal-ISO), the agency that oversees the flow of wholesale power throughout most of the state, issued a Stage Two power alert early in the morning. However, it appeared unlikely that there would be any shortages that would require power cuts during the peak demand period around 6 p.m. PST.

"We expect to skate by at the peak with reserves of about 5 percent," said Kellan Fluckiger, chief operating officer for the Cal-ISO.

California was under a power alert for the 11th consecutive day on Thursday, and the fact that it was issued before dawn, a time when electricity demand is at its lowest, spurred speculation that some fresh disaster had struck during the night, such as a major mechanical failure at a power plant or along a major high-voltage transmission line.

Another distinct possibility was that California's credit was no longer good and power producers outside the state were not willing to sell to California utilities that have been caught between soaring wholesale costs and limited ability to pass those costs on to ratepayers due to restrictions contained in the state's deregulation plan.

Fluckiger told reporters that the Stage Two had been called early to give his technicians the flexibility to call on emergency sources of electricity earlier, and that there was "good participation" Thursday from out-of-state suppliers.

"We were able to schedule some of the peak [period] stuff for tonight early this morning," Fluckiger said. "But that doesn't mean it isn't exciting around here."

Fluckiger said that Richardson's statements Wednesday appeared to have prompted some sellers to stay in the market and to go ahead and front California the necessary power.

Richardson said in Washington that he was invoking his emergency authority under the Federal Power Act and ordering power producers to supply electricity to California at a price to be set by the federal government. The formal order had yet to be issued Thursday, Fluckiger said; however, it was expected in the near future.

Washington was expected to take additional steps today toward bailing California out of its dilemma in which it is forced to purchase high-priced electricity from out of state. Demand has increased this winter because of chilly weather over the entire West, and the lack of electricity from power plants that have been shut down for needed maintenance.

The Federal Energy Regulatory Commission, which governs interstate transportation of natural gas and electricity, was scheduled to announce its formal rule changes for the California market this afternoon.

Fluckiger said he expected the ruling to cover issues contained in its preliminary plan, including incentives to sell more electricity into the so-called forward market, rather than in the more volatile spot market.

Sen. Dianne Feinstein, D-Calif., issued a statement late Wednesday calling on FERC to institute a price cap for the entire West – similar to the emergency cap instituted by California Gov. Gray Davis – to discourage sellers from seeking higher prices in other states.

"We are united in asking that the Federal Energy Regulatory Commission establish an immediate regionwide wholesale price cap to stop the bleeding of electricity from California until stability can be returned to the market," Feinstein stated.

"We are also calling on FERC to step in and mandate reasonable long-term contracts between privately owned electricity generators and utilities."