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As blackouts continue wreaking havoc on California, industry leaders are becoming increasingly critical of Gov. Gray Davis plan to buy the transmission grid from the states cash-strapped utilities.
California companies also face the possible bankruptcy of two of those utilities, which could further delay investment in the states ailing power lines that carry electricity to businesses and consumers.
“We are not convinced at all that buying transmission lines is the answer,” Carl Guardino, president of the Silicon Valley Manufacturing Group, said last week, as blackouts hit 1.3 million utility customers in both northern and southern California.
Gino DiCaro, a spokesman at the California Manufacturers and Technology Association agreed. Buying the grid “wont put any megawatts online,” DiCaro said. But the sale is “taking up all the governors time.”
For weeks, Davis has been trying to buy power lines owned by Pacific Gas and Electric and Southern California Edison, both of which are on the brink of bankruptcy, as well as lines owned by San Diego Gas & Electric. PG&E and SCE said they have lost $13.7 billion over the last nine months. Davis said that purchasing the grid — at a cost of up to $7 billion — will give the utilities enough cash to continue operating, but critics said that he is offering more than the grid is worth.
Technology leaders fear that in the rush to buy the grid and build more power plants, distribution system upgrades will be overlooked. “Transmission impacts Silicon Valley the most,” Guardino said.
Upgrading a key bottleneck in the power grid between northern and southern California will take up to five years and cost some $250 million, according to the California Independent System Operator. The agency also said that utilities need to invest about $2 billion over the next eight years in the states transmission system.
Stephen Lee, an area manager for grid operations and planning at the Electric Power Research Institute in Palo Alto, Calif., believes fears about state ownership of the grid are misplaced. “Having state ownership of the grid — and the financial capability to keep it up — would be a healthy thing for the market,” Lee said.
But the states transmission system may get mired in a bankruptcy court fight. In recent weeks, several power suppliers that have not been paid by the utilities have threatened to force PG&E and SCE into bankruptcy, a move that Paul Patterson, an electric power analyst at Credit Suisse First Boston said could short circuit spending on the states power grid.
“Major capital improvements on the transmission system may not be a priority for a bankruptcy attorney,” Patterson said. “His job is to make sure creditors get paid, not to make sure California has a reliable transmission system.”