- The Washington Times - Thursday, February 1, 2001

U.S. taxpayers might have to shoulder a portion of the financial burden for cleaning up the power mess in California, a bill that could run into billions of dollars, the Senate Energy Committee chairman warned yesterday.

Sen. Frank H. Murkowski, Alaska Republican, said that a federal order issued by the Clinton administration and extended by President Bush, forcing power generators to sell electricity to California's near-broke utility companies, could make the federal government liable to creditors for the cost of that power if the utilities formally declare bankruptcy.

"In the event California cannot repay generators for this power, the federal government is going to have to meet that obligation, because this was an order of the federal government," Mr. Murkowski said during a committee hearing on the power crisis.

No company has threatened to sue the government for the cost of the power, and some specifically have said they don't intend to.

California's experiment with deregulating the electricity market has gotten off to a disastrous start. Wholesale prices have soared, but the electrical utilities are unable to pass on the costs because the state limits the rates they can charge customers. The utilities, already under heavy debt loads before the price increases, do not have enough cash to meet their bills and have defaulted on millions of dollars of debt with billions more coming due.

Surging demand for electricity, driven in part by power-hungry computer industries, has put unexpected strain on the state's power grid and forced the utilities to cut power randomly in parts of the state to conserve energy, a process known as "rolling blackouts."

In December, the Clinton administration ordered out-of-state power companies to sell to California utilities, despite the threat of bankruptcy. Mr. Bush extended the order for two weeks, through Feb. 6. Mr. Murkowski expressed bitterness yesterday about the federal involvement.

"I just want to make the record clear that this administration has basically passed on to taxpayers, the entire United States, the contingent liability associated with billions of dollars in power that was ordered by this administration to give California time to work out its problems," Mr. Murkowski said.

Federal taxpayers legally could be forced to shoulder about $2 billion if the companies collapse financially and the generators sue the government for repayment.

The Bush administration has extended the Clinton order forcing power generators to sell to the troubled companies, but Mr. Bush has made clear he will not extend the order again when it expires on Feb. 7. Although he has expressed concern about the prospect of the electricity crisis spilling over into other states, Mr. Bush has said California ultimately must be responsible for its own problems.

Mr. Bush so far has resisted Democratic calls, supported by the utilities, to impose federal price caps on the rates that power generators charge the California utilities.

Facing the new hard line from Washington and growing concern in the public and on Wall Street, California officials have been scrambling to fix the crisis.

The state Senate yesterday approved a $10 billion plan to rescue utilities pushed to the brink of bankruptcy by California's deregulation law. The bill now goes to the Assembly. If it passes, it would be sent to Gov. Gray Davis, who supports it.

The bill lets the state sign long-term contracts to buy power and sell it to the customers of financially strapped Southern California Edison and Pacific Gas and Electric Co. One controversial element is a provision that would allow the state Public Utilities Commission to raise electricity rates to cover wholesale costs.

A spokesman for Mr. Davis said yesterday that the governor had no comment on Mr. Murkowski's dire warning about a federal bailout.

Newly installed Energy Secretary Spencer Abraham and other Bush administration officials will meet in Portland, Ore., today with Western governors to discuss the crisis. States surrounding California have been hit with shortages and rate increases as their own utilities struggle to help California.

"If there are short-term things we can do for California, this administration would be pleased to look at them," White House spokesman Ari Fleischer said yesterday, "but our focus remains that the best way to help California to help itself is to allow California to do what they are doing, which is to enact the legislation that they're working diligently on now."

The California government's efforts may have helped hold off a federal bailout, which appeared to be a serious possibility a few weeks ago when Mr. Davis seemed disinclined to help the utility companies. The power companies have managed to avoid both bankruptcy and a collapse of the power grid during several precarious weeks, and Wall Street is beginning to show modest optimism by bidding up the share prices of the California utilities.

The region has enjoyed mild weather in the past few days, reducing power demand throughout California.

But Mr. Murkowski and other federal officials remain concerned. The utilities have hundreds of millions of dollars in debt due this week and billions more due over the next few weeks.

"California's problems are affecting everyone connected to the grid the entire West and I fear that the worst is yet to come," Mr. Murkowski said yesterday. "It is anyone's guess what will happen this summer when the air conditioners are turned on."

• Patrice Hill contributed to this article, which is based in part on wire service reports.

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