- The Washington Times - Thursday, January 11, 2001

The debacle that has driven California's electric companies deep into debt and has threatened the state's power supply is unlikely to occur in the Washington area, utility industry officials say.
California's situation is unique because its fragile utility industry is supported by too little energy. Utilities are paying high costs for energy because they are buying electricity on expensive, short-term contracts, and the industry has not built any new power plants in more than a decade.
It's not a popular model for deregulation.
"No one has copied the California model," said Bill Brier, spokesman for the Edison Electric Institute, the District of Columbia-based group that represents the nation's investor-owned utilities.
Clinton administration officials, representatives from California Gov. Gray Davis' office and utility industry executives began a second round of talks late yesterday morning in an attempt to build on the progress made during a seven-hour meeting on the state's crisis, which ended after midnight Tuesday.
Among the main items discussed in the follow-up round of negotiations was finding a way to push back the due date for some of the utilities' debt, an administration source said.
Hours after the summit at the Treasury Department ended, Federal Energy Regulatory Commission Chairman James Hoecker resigned as head of the independent agency. Mr. Hoecker, a presidential appointee who participated in the marathon meetings, has been the target of criticism from Mr. Davis for failing to cap wholesale electricity prices.
While California's electricity shortage is still unresolved, industry analysts said consumers in Maryland and the District where deregulation has started are unlikely to see energy shortages like those that have threatened Californians. Deregulation begins in Virginia next year.
That's because local power companies have continued to build plants and have secured electricity under long-term contracts.
Power plants in the five-state region that share an electric grid produced a combined 52,000 megawatts of energy in 1990. That increased to 58,000 megawatts last year and will increase to 68,000 megawatts by 2010.
"We've been adding capacity. In California, it's a classic supply-and-demand situation," said Wayne Harbaugh, manager of electric pricing and supplier services and Baltimore Gas and Electric Co., which has 1.1 million customers in Maryland and southern Pennsylvania.
California plants have a combined generating capacity of 53,000 megawatts, up from 50,000 megawatts 10 years ago, said Claudia Chandler, spokeswoman for the California Energy Commission, the state agency that licenses power plants.
While there has been an increase in the power-generating capacity of Mid-Atlantic companies, power companies in California are producing about the same amount of power they did a decade ago, even though demand is increasing twice as fast as the national average, Mr. Brier said.
California also relies on hydroelectric generators, but when droughts hit the rain-starved region, the devices don't help the overworked fossil-fuel generators. Some regions are suffering from a drought now.
California utilities also have been hampered by their inability to sign long-term contracts with energy suppliers.
When deregulation began in California, utilities sold their power-generating plants. That happened in Maryland and the District, too. But in California, utilities were forced to buy energy on short-term markets.
That has proven disastrous, California Gov. Gray Davis said yesterday morning after meeting with Clinton administration officials and the chiefs of California power companies.
"There were a lot of other things that were discussed, but there is no end to this problem unless we can finalize those long-term contracts, and I think we made great progress toward that," he said.
In the District and Maryland, the scenario was much different.
When Potomac Electric Power Co. sold most of its power-generating plants to Southern Energy Inc. in June, it also negotiated a four-year deal with the company to sell electricity to Pepco, allowing the company to avoid the spot market.
"The spot market is always sensitive and volatile," Pepco spokesman Robert Dobkin said.
Pepco has 680,000 customers in the Washington area.
Out-of-state power generators have been providing California utilities some relief, under a federal emergency order, but they may not have to continue doing so. Energy Secretary Bill Richardson is considering whether to extend an order that was set to expire at midnight today California time.
Under the order, generators like Southern Energy that have plants in the state and have sold power to California markets in the past are required to sell excess energy to the state's utilities to prevent power shortages.
The order was set to lapse because Mr. Davis failed to ensure the state would take action by Jan. 15 to cut its peak electricity demand by 5 percent.


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