Holiday Weekend May Bring Blackouts to California

LOS ANGELES-Millions of California commercial and residential property owners are entering the long holiday weekend faced with the grim specter of electricity blackouts, since some of the state’s utilities are considering rationing their power supply. Meanwhile credit-rating giant Standard & Poor’s has hinted that credit ratings for two major California energy providers might soon be lowered to that of junk bonds.

LA-based Southern California Edison, which serves about 11 million customers, was said to be considering a rationing plan that could go into effect over the weekend. The plan, which could leave customers without power for hours at a time, could also result in stalled elevators, inoperable traffic signals and even cut the electricity needed to operate police stations and hospitals.

The state’s two largest electric utilities, Edison and Pacific Gas & Electric, sold off many of their power plants for billions of dollars after helping to push a deregulation bill through the California Legislature in 1996. The measure also freed the state’s big investor-owned utilities from price caps, a move which they said would foster competition and drive utility bills lower.

The opposite is happening now. No longer owning enough power plants to meet their customer demand, many utilities have been forced to pay sky-high prices to purchase electricity from smaller providers. Now their ability to borrow money for those purchases is in jeopardy. A downgrade from credit-rating S&P, which already has put both Edison and PG&E on its “negative watch” list, would force their borrowing costs even higher or, perhaps, even prevent them from borrowing any money at all.

California Gov. Gray Davis on Thursday was weighing a plan that would allow the utilities to dramatically raise the rates they charge commercial and residential consumers as early as January. Some consumer groups are furious about that idea, claiming the hikes would make users “pay for the industry’s past mistakes” and that no increases can legally be made without first holding public hearings.