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Wednesday, 9 May, 2001, 20:47 GMT 21:47 UK
California approves bond issue
The California state power grid during a blackout
A manager surveys California's state power grid
By BBC News Online's North America Business Reporter, David Schepp

State senators in California have approved a multi-billion dollar bond issue to pay for emergency power and have sent the bill onto Governor Gray Davis, who is expected to sign it.

The $13.4bn bond sale, approved by California's lower house, the Assembly, on Monday, will not take place until August, however, because it failed to get earlier approval by two-thirds of Assembly members.

In failing to secure two-thirds of the Assembly, the state's treasurer must now wait 90 days before the bonds can be sold.

But there is more. After Governor Davis signs the bill, the bond sale has yet one more hoop to jump through. The legislature must disband its special session on energy, which lawmakers hope to adjourn on Monday, in order to get the clock ticking.

"That way, since this thing takes 90 days, we'll be able to start selling the bonds to replenish the general fund," said Senate President John Burton, a San Francisco Democrat.

The state thus far has spent $6bn on power purchases, which have led to the concerns about cutbacks in state programs for health and education.

New pricing structure

In a separate move by the state's utility regulatory agency to boost revenues, the state has proposed a new pricing structure that would increase rates for electricity users up to 50%, raising up to $5bn.

The California Public Utility Commission (CPUC) unveiled its proposal on Wednesday amid a third consecutive day of hot weather in California.

The CPUC plan involves "tiered pricing", which could result in no increases among residential customers who meet certain conservation targets.

The plan, which has two components, would raise rates for commercial and industrial users by 20% to 50% and residential consumers by 41% to 48%.

The plan is to be voted on next Monday by the five-member CPUC, which moved to increase rates 27 March but did not specify by how much differing rate classes would increase.

Just keeps getting hotter

Meanwhile, three days of hot weather threaten Californians with blackouts as record power use, caused by air-conditioners, overburdens the state's power grid.

Sporadic outages were common on Tuesday, from Beverly Hills in the southern part of the state to Berkeley - across the bay from San Francisco - in the north, as state residents turned up air conditioners to deal with the heat.

Temperatures were expected to hit 95 degrees (35 Celsius) on Wednesday in the state capital of Sacramento.

Energy officials warned that the three days of outages do not bode well as the state approaches summer with its sustained higher temperatures.

In response, state officials are anticipating revising upward its earlier estimates of 30 to 35 days of outages this year.

They also warn that California cannot build power plants quickly enough to avert a power crisis this summer. Estimates call for bringing new power plants online but not until 2002 at the earliest.

Inflated gas prices

In yet another controversy to emerge out of the West Coast energy crisis, Southern California Edison has accused one of its suppliers of bilking the electric and gas utility out of $1bn.

The utility company, which services much of the Los Angeles area, in a filing with the Federal Energy Regulatory Commission (FERC), accused El Paso Corp of artificially raising prices of natural gas in California by over $3.7bn last year.

The accusation, brought to light in Wednesday editions of The New York Times, says El Paso's ability to curtail the flow of gas to California was the chief reason for the state's soaring natural gas prices.

El Paso owns the largest pipeline in the area that connects California to the Southwest's gas-producing regions.

In response, El Paso told FERC in a filing with the regulatory agency that California's gas-price spikes were more related to an "insufficient supply infrastructure" and "unexpected and unprecedented demand".

El Paso also blamed the state's bungled attempt at deregulation and "more than a decade's worth of bad public policy decisions" for the state's current energy predicament.

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See also:

08 May 01 | Business
Crisis-hit state turns to bond issue
08 May 01 | Americas
Heat forces California blackouts
01 May 01 | Business
Is there a US energy crisis?
01 May 01 | Americas
Cheney warns of power shortages
08 Apr 01 | Business
Bankrupt US utility in bonus row
06 Apr 01 | Business
US power giant files for bankruptcy
02 Feb 01 | Americas
California approves power plan
18 Jan 01 | Americas
California blackout: Why it happened
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