Article

Monday February 5 7:04 PM ET
Bush To Let Power Order Expire

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON (AP) - Standing by his word, President Bush (news - web sites)
will allow a federal order to expire Tuesday that required wholesale
electricity companies to sell to California's cash-strapped utilities, Bush's
spokesman said.

The agency that manages California's troubled power grid was surveying major
suppliers to see what power they will have available on the wholesale market
when the order ends, a spokeswoman for the agency said.

Asked about the emergency directive that the Bush administration extended
Jan. 23 for two weeks, White House press secretary Ari Fleischer said Monday:
``It shall expire tomorrow.''

California lawmakers last week approved a $10 billion long-term plan to ease
the state's power crunch. The state will sell bonds to buy electricity giving
time for the state's two near-bankrupt private utilities to come up with
their own recovery plan.

But even as Gov. Gray Davis (news - web sites) and state lawmakers celebrated
the agreement, the state remained under a power emergency with electricity
supply margins so small during the weekend and into Monday that sporadic
blackouts were possible.

Officials at the California Independent System Operator (news - web sites),
the agency that manages the state's electricity market, were uncertain
whether they would have enough power after the federal directive expires
Tuesday.

``We're not sure what the impact will be. We're talking to suppliers to see
what their plans are,'' said Stephanie McCorkle, a spokeswoman for California
ISO.

In mid-December, the Clinton administration declared an energy emergency in
California and directed that suppliers continue to sell to the state's nearly
broke utilities - Southern California Edison (news - web sites) and Pacific
Gas & Electric - even though for some time they had been unable to pay for
their purchases, amassing debts that now have reached $12.8 billion.

On Jan. 23, Bush extended the order, but made clear through spokesmen and his
energy secretary, Spencer Abraham (news - web sites), that the power order
would not be prolonged further.

Fleischer noted Monday the directive has been sharply criticized by utilities
and officials in other Western states who worry about electricity shortages
of their own.

The order ``has implications for the region as a whole,'' said Fleischer.

Among those most critical of the federal directive have been utility and
government officials in the Northwest, where electricity prices have soared
because of the tight wholesale market caused by California's demands. In
Tacoma, Wash., the utility recently imposed a 50 percent rate hike for its
customers to try to pay for higher wholesale costs.

Major suppliers of power were not committing themselves one way or the other.

``I don't know what we will do,'' said Richard Wheatley, a spokesman for
Houston-based Reliant Energy, a major wholesale supplier with five generating
plants in California.

``We're encouraged by the recent progress in California,'' said Wheatley.
``But the credit worthiness of SoCal and PG&E and their ability to pay for
past power purchases remains very much in question.''

Pressed on whether Reliant would continued to sell to the utilities, Wheatley
said, ``We're going to continue to sell power to creditworthy buyers.''

Reliant filed a lawsuit last week, challenging a directive from the
California ISO that demanded power suppliers confirm that they planned to
continue selling electricity in the California market. Reliant argues in the
suit, which has yet to be heard, that the power agency lacks authority to
make such a demand.

Meanwhile, the chairman of a House Commerce subcommittee on energy became the
latest in a slew of Republican lawmakers who have chided California for not
building power plants and expecting low power rates.

``We want to work with California, but California has to work with the rest
of the country,'' said Rep. Joe Barton (news - bio - voting record), R-Texas,
during a speech at a conference of the American Public Power Association.

He said California officials have ``an obligation'' to review environmental
restrictions that inhibit power production, construction of new power plants
and transmission lines. Like Bush, Barton rejected federal controls on
wholesale prices, arguing that price regulation would lead to greater
shortages.

The APPA, which represents public power agencies around the country including
large ones in the Northwest and in California, passed a resolution calling
for the federal government to temporarily regulate wholesale prices until
California's power market problems are resolved.

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On the Net: California Independent System Operator: http://www.caiso.com/

California page of American Public Power Association:
http://www.appanet.org/general/pressroom/california.htm

Energy Department: http://www.energy.gov