California Gov. Meets With Greenspan on Power Crisis
By Patrick Connole
Reuters
WASHINGTON (Dec. 26) - California Gov. Gray Davis met on Tuesday with Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers for more than two hours about the California electricity crisis, which has left the country's richest state threatened with power outages.
Davis' spokesman, who accompanied the governor to the Fed, confirmed that the meeting started around 3:30 p.m. Davis left the building soon after 5:30 p.m.
Neither Davis or Summers commented immediately after the meeting.
The California governor did speak about the conference during an interview on national public television, saying Greenspan and Summers offered advice on the "intractable problem" of correcting his state's power markets woes.
"They gave me about two hours of their time, and suffice it to say they agreed this was one of the more intractable problems they've seen in the short-term, but we will get through this with more conservation and bringing more supply on line," Davis told the television interviewer.
Greenspan was not asked to step-in immediately and help stave off a credit crunch for the state's largest utilities, Davis said. He noted that the state's move to deregulate its electricity markets needed to be fixed, and said the longer term outlook would improve after corrections were made.
"Right now deregulation has not worked in California," Davis said, accusing power generators of gouging by charging 800 percent to 900 percent above their costs to California utilities forced to pay such high rates.
Davis also said the California economy, despite the power problems, would outperform the national economy in 2001.
"There is no question about it, this is a serious problem, but we will manage it," Davis said.
On Jan. 4, the California Public Utilities Commission will meet to consider lifting a freeze on retail electricity rates in order to protect the credit-worthiness of the state's two largest utilities and their ability to buy power.
The power crisis has put Pacific Gas & Electric, a unit of PG&E Corp. and Southern California Edison, part of Edison International, under threat of bankruptcy, forced warnings to consumers about possible blackouts and state leaders to assess what went wrong with their once-pioneering plan for deregulating wholesale and retail markets.
On Tuesday, quiet trading in the U.S. corporate bond market was enlivened by talk about the crisis, with investors awaiting the crucial hearings by the California Public Utilities Commission.
Pacific Gas & Electric and Southern California Edison face $8 billion in losses and possible insolvency unless the commission allows them to pass on enough of their soaring wholesale power costs to consumers. The two investor-owned utilities operate under a residential rate freeze.
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