US power talks end in failure

Storms have contributed to the problems

A solution to California's power crisis remained out of reach after marathon talks between the federal government, state officials and electricity firm executives.

Two million residents of the nation's richest and most populous state have been facing power cuts after an acute electricity shortage was compounded by severe storms.

Officials monitor the power supply

Clinton administration officials ended the talks with a warning to state authorities that they must agree proposals with almost-bankrupt electricity firms by Tuesday to ensure long-term supplies.

They said a solution had to be worked out by the time businesses went back to work after a three-day holiday weekend.

Bankruptcy fears

Wall Street traders have been anxiously watching the negotiations over the past few days to evaluate the financial standing of the electricity companies.

They have threatened to cut their credit ratings, making it harder for them to borrow money.

A power grid shows an error message

Although no decisions were reached during Saturday's emergency talks - which included Treasury Secretary Lawrence Summers - further negotiations were scheduled over the next two days.

California Governor Gray Davis will lead the meeting with utility company bosses.

California's two largest firms - Southern California Edison and Pacific Gas & Electric - say they are on the verge of bankruptcy because of their inability to pass on much higher wholesale power prices.

Silicon Valley

But consumer groups say the financial problems are the result of mismanagement.

The companies now want to raise their electricity rates to ease their debt.

But state officials are loath to see ratepayers hit with massive bills.

The alternative - rolling power cuts - risks undermining the state's strong economy.

Electricity reserves have fallen so low that the first mandatory statewide blackouts for more than 50 years were imminent.

Energy is vital to many of the giant companies which have their headquarters in the hi-tech corridor of Silicon Valley.