Bush keeps power on

WASHINGTON -- Federal directives that require wholesalers to sell power to California's nearly broke utilities will stay in effect for two more weeks, but won't be extended again, the Bush administration says.

Energy Secretary Spencer Abraham said Tuesday he has been assured by California Gov. Gray Davis that two weeks is all that's needed and restore the financial health of the utilities and keep power flowing.

The directives, first issued by the Clinton administration, require power generators and natural gas companies to continue selling to California's two investor-owned utilities even though they are teetering on the edge of bankruptcy and have accumulated almost $12 billion in debt.

The federal requirements were to have expired at midnight Tuesday.

Abraham said the temporary extension was approved to give California "sufficient time to ... restore the financial health of the utility companies and develop other sufficient sources of energy" to meet the state's needs.

"The president has no intention of extending this any longer than two weeks," said a senior White House official, speaking on condition of anonymity.

The hard line by the Bush administration reflects its reluctance to become entangled in the California power mess, at least in dealing with short-term responses.

In the long run, administration officials said, the president is determined to come up with a broader energy package, likely to be sent to Congress next month, aimed at boosting power production by easing restrictions on plant construction and development of natural gas reserves.

The administration remains opposed to regulating electricity prices, even on the wholesale California market where power generators have been accused of price gouging.

Such caps could prompt suppliers to send power elsewhere, which would deepen California's supply problem and dampen enthusiasm for new power plant construction.

"The cure ... can easily be worse than the disease," Gregory Werden, a Justice Department lawyer, said Tuesday at a meeting at the Federal Energy Regulatory Commission.

Suppliers have threatened to stop selling to Pacific Gas & Electric and Southern California Edison because of fear that their mounting debt will drive them into bankruptcy and prevent future payments.

Some Northwest lawmakers criticized the federal intervention as threatening to jeopardize power supplies in their region. A relatively dry winter has caused water levels to be lower than normal at hydroelectric dams in the Northwest, raising fears about electricity production this spring.

Sen. Gordon Smith, R-Ore., said Bush assured him in a telephone call the directives will last no more than two weeks. Oregon is "in jeopardy of becoming an energy farm to California" when electricity is needed in the region, Smith said.

Meanwhile, California's utilities asked FERC to create a special agency to investigate wholesale electricity prices in the California market and give it authority to punish price gougers.

Power generating companies opposed the proposal on grounds FERC and the Justice Department already have authority to investigate abuses.

The state's power grid managers told emergency commission that California utilities paid $30 billion for power last year, more than four times what they paid in 1999.

If answers are not found to the supply problems and prices surge, the state's electricity crisis will deteriorate this summer when demand is expected to be greater, Anjali Sheffrin, a market analyst for the California Independent System Operator, told FERC staffers. Cal-ISO is the agency that controls the state's power grid.

Spot prices for wholesale power in California has been above $200 per megawatt-hour since November, spiking at times to more than $600 a mwh. State officials would like prices to be in the $55 per mwh range.

Some Republican members of California's 52-member congressional delegation joined Democrats in circulating a letter urging additional administration help for California, including price controls on wholesale electricity.

Associated Press writer Bart Jansen contributed to this report.

On the Net: Federal Energy Regulatory Commission: http://www.ferc.fed.us/

California Independent System Operator: http://www.caiso.com/