Blackouts across California as power crisis hits

CALIFORNIA'S governor has declared a state of emergency as chaos in its electricity-generating industry spread to the rest of the state, large parts of which are today blacked out.

After months of warnings and pleas from its power companies - which have been brought to their knees by the terms of the state's deregulation of the industry in 1996 - California faces a 45 per cent power shortfall today, Governor Gray Davis said.

Nearly a quarter of a million homes and businesses in northern California lost power as regulators ordered blackouts of 90 minutes and more for the first time.

Traffic lights, cash machines and petrol pumps were also shut down, and restaurants and shops were among the businesses closed, crippling the usual Californian lifestyle from San Francisco to Santa Cruz, and bringing hundreds of miles of freeway to a standstill in massive traffic jams.

In Silicon Valley, hundreds of leading IT companies switched to their own power generators.

Only hospitals and airports remained untouched by the crisis in America's largest state and the world's seventh largest economy.

Only the 11th-hour import of Canadian power saved the southern part of the state from a similar fate.

"We have a big challenge," said Mr Davis, who will ask legislators today for funds to "keep the lights on in California" for another week.

The crisis was brought about by desperate financial problems at the state's two major power companies, Southern California Edison and Pacific Gas and Electricity. Under the terms of the state energy market's deregulation in 1996 they have been forbidden to increase prices to consumers even though wholesale power prices have rocketed since 1996.

Mr Davis said that four major power generators had threatened to call in their debts at both utilities. This would have forced them into bankruptcy.

On Tuesday, Southern California Edison temporarily suspended nearly $600 million (420 million) of debt payments, and confirmed that it was in default to some of its bondholders. Pacific Gas and Electricity, and its parent company PG&E Corp, said yesterday it had defaulted on a total of $76 million (53 million) of debt.

As legislators gather in Sacramento to grapple with the crisis, Southern California Edison - which expects to run out of cash next month - begged consumers: "Turn off your computers, your driers..."

The governor gained emergency powers last night to appropriate the general funds necessary to keep the electricity flowing for another seven to 10 days.

Mr Davis also said he was instructing the state's department of water resources to use funds already budgeted to it to buy additional power.

California's power regulators were forced for the first time to order large-scale rolling blackouts - unplugging some 200,000 customers for up to two hours.

"We've come to the end of the road," said state power manager Jim Detmers.

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