US Energy Sec. Bill Richardson Tuesday warned California utilities could be facing a "liquidity crisis" in a meeting in Washington with federal regulators, utilities, and California electricity marketers.
Electricity supplies are tight, natural gas prices are high, and wholesale electricity prices remain much higher than historic norms, Richardson explained, putting the state's utilities at risk.
"I'm concerned that we may be on the verge of a liquidity crisis," Richardson said. He noted Southern California Edison Co., a unit of Edison International, is warning thousands could be laid off, maintenance of essential utility facilities could be delayed, and the state's electricity supplies could be threatened, if generators and marketers become concerned they may not get paid because of credit issues.
In a filing with the US Securities and Exchange Commission, Pacific Gas & Electric Co. said if it cannot continue deferring wholesale power purchase costs, its earnings will be hurt. And it may not be able to pay dividends to its parent PG&E Corp. which would harm the parent company's dividend-paying ability.
Last week some power suppliers threatened to halt sales to California for fear they might not be paid by the state's biggest utilities, now strapped by more than $8 billion in power costs, prompting Richardson to issue an emergency order requiring suppliers with surplus power to offer it to California.
Since June, California's three investor-owned utilities have been paying more for wholesale power than they have been able to recover from consumers. The California Public Utilities Commission is scheduled to take up a request for rate increases Thursday, after rejecting similar requests in November.
Resolving the supply issue will take time, Richardson said, "but we are now facing a situation that requires immediate action." The energy secretary said he is disappointed the Federal Regulatory Energy Commission (FERC) decided not to impose a regional cap on electricity prices in a Friday order.
But, he said, the FERC order includes a number of important actions, including permitting utilities to engage in long-term contracts to hedge against the volatility of the spot market.