July 24, 2001. Copyright, 2001, Graphic News. All rights reserved

Dark times for the Golden State
By Elisabeth Ribbans

LONDON, July 24, Graphic News:  CALIFORNIA may have been called The Golden State after the gold that was found there in the 1840s. Or perhaps it was named for the fields of golden poppies or the burnished hue of the bunch grasses. But in modern times, the gold is most readily associated with the sun that shines an average 10 to 12 hours a day in summer, fuelling the outdoor lifestyle from beach to golf course.

Unfortunately, the California sun doesnÕt fuel much else. While solar energy booms in other places, particularly in Japan and Germany, AmericaÕs richest and most populous state may be regretting that just 0.3 percent of its electricity is generated by the abundant sun.

Instead, over the past 20 years, California has put increasing faith in natural gas as the major source of its energy supply. The cleanest of the fossil fuels and, until the summer of 2000, attractively cheap, it has become the fuel of choice for many residential and commercial users. Electricity generators also made the switch so that by 1999 natural gas was the origin of a third of CaliforniaÕs power. But the Òdash for gasÓ has left the state burnt in recent months as prices have rocketed, bringing blackouts to some areas.

The rush is now on to get energy flowing into California. The Bolivians Ð who have five times more natural gas than they need Ð are not the only ones itching to come to the rescue. The landlocked nationÕs scheme is merely the most ambitious: a $5 billion, 5,000-mile gas route that runs across sea and through three Latin American countries.

How did California reach such straits? The problem is widely blamed on the 1996 deregulation of CaliforniaÕs energy supply industry, a move that forced utilities to sell their generating plants and buy in power from the wholesale market. The programme, based on successful experiences in Britain and Scandinavia, was meant to deliver lower prices to consumers. However, unlike Europe, California lacked the spare capacity to meet the clamour for cheaper power. Neither did it encourage an expansion of supply Ð indeed some critics say the stateÕs strict environmental laws were an active deterrent to the building of new plants.

As demand soared Ð exacerbated by whirring air-conditioners during last yearÕs hot summer Ð so did wellhead prices. Rules that prevented the higher costs being passed on to consumers pushed some utilities towards bankruptcy by January this year, forcing the state to step in and make its own arrangements for buying Ð and rationing Ð power.

The California Energy Commission says although prices rose generally across the U.S. Ð because of a drop in output and a cold winter on the East coast Ð those at the California border increased at a much higher rate than elsewhere, Òcaused by premiums that marketers were able to charge for transporting gas to CaliforniaÓ. The state produces only 16 percent of its own natural gas needs, importing 46 percent from the south-western U.S., 28 percent from Canada, and 10 percent from the Rocky Mountain states.

There are signs that the shortage may be easing. The commission says the number of drilling rigs is increasing, interstate pipelines are expanding capacity, and storage facilities throughout California are being more fully utilized. But these efforts will take several years. In the meantime, President George W. Bush has responded to the situation by announcing a new energy plan that puts greater emphasis on coal and nuclear energy Ð leading some environmentalists to claim that the California ÒcrisisÓ was in part stage-managed to suit the Republican policy agenda.
/ENDS