California Issues Blackout Warnings for Monday and Tuesday

Blackout warnings were issued for the first time Sunday by the agency that runs California's power grid.

The California Independent System Operator said potential blackouts could occur Monday and Tuesday afternoons between noon and 8 p.m. both days.

It was the first time the ISO issued warnings under the new early warning system, which lets customers know of possible outages 24 to 48 hours in advance.

Temperatures in the mid-90s to triple digits are expected Monday and Tuesday in many areas served by Pacific Gas and Electric Co. As a result, an increased energy demand is forecast.

Meanwhile, Power company profits gained in California's electricity crunch are funding a new ad campaign blaming Gov. Gray Davis for rising costs, state Democratic officials said.

The television advertisement is set to begin airing Monday, the same day federal officials are expected to slap new limits on wholesale electricity prices in the state.

The ad campaign, credited to a group called American Taxpayers Alliance but produced by GOP strategists, features grainy footage of Davis and attacks him for failing to secure long-term, cost-saving contracts before the wholesale price of electricity soared.

Democrats said Sunday in a conference call with reporters that they expect the group will spend $5 million on the ad campaign. Time magazine reported that Reliant Energy, one of the companies state officials have accused of price-gouging, is among hundreds of corporations providing money for the campaign.

"The dollars that have been creamed off the top of our constituents are now being poured into a campaign to blur the issue," said Rep. Anna Eshoo, D-Calif.

S. David Freeman, Davis' chief energy adviser, said California has been overcharged anywhere from $8 billion to $15 billion for the electricity it uses.

But some relief for California may come as early as Monday at a special meeting of the Federal Energy Regulatory Commission. The commission, which regulates wholesale electricity transactions, is expected to slap 24-hour caps on the price of power in the West, The Washington Post reported Sunday.

FERC approved a limited price "mitigation" program in April to rein in the wholesale price of power. California officials said Sunday the move had accomplished little, and asked for more direct action.

"If FERC does not intervene and help us we are subject again to the whims and caprices of the generators," said Michael Kahn, chairman of the California Independent System Operator, which manages the state's power grid.

California officials maintain that long-term contracts secured by the state and an aggressive conservation program have led to a recent softening of electricity prices. The state has signed $43 billion in long-term power contracts, but still buys about half of its electricity on the volatile spot market.

"The reason the spot market prices are lower is we have added to supply and subtracted from demand," Freeman said.

The expected FERC action would control the wholesale price of power around the clock, expanding on the current order that reins in prices only during the most drastic shortages. The move comes as House Democrats — and some Republicans — have pushed for legislation that would force FERC to impose some sort of price caps.

Freeman said he favors cost-based price caps, which make allowances for "reasonable" profits.

Kahn said if the new limits do nothing more than extend the previous mitigation plan, they will accomplish little.

"We would have to say that is too little, too late and simply not enough," Kahn said.

Davis will take up the issue himself on Wednesday, when he is expected to testify before the Senate Governmental Affairs Committee.

The committee, whose new chairman is Sen. Joseph Lieberman, D-Conn., will examine how the federal government regulates energy.