California Legislature to Meet: Another Day at Stage 3

California Governor Gray Davis declared a state of emergency and has asked the state legislature to pass legislation today to appropriate general fund monies to keep the lights on in the state for one week to 10 days.

The state faces a second day of Stage 3 Emergency status with the potential for more rolling outages.

By declaring a state of emergency, Davis can use already budgeted funds to mitigate or eliminate the power shortage. Davis has instructed the state's Department of Water Resources to use some of its budgeted funds to buy additional power. That department is the largest buyer of wholesale electricity in California.

The governor also spoke with the CEOs of Duke Energy, Southern Co., Reliant and Dynegy--the four principal generators in the state. These generators had said they would call in the debts owed them by Pacific Gas & Electric and Southern California Edison today and would not sell anymore power to California until those debts were paid.

However, during the conference call with the governor, the CEOs agreed not to take action as long as funding legislation passes by the end of the day today.

Pacific Gas and Electric Co. has defaulted on $76 million of short-term debt and is unable to trade with the California Power Exchange due to defaults under some of its credit lines. Now, the utility must trade in the over-the-counter market. Pacific Gas & Electric is also reportedly considering laying off 1,000 employees to cut costs. Southern California Edison also has defaulted on $596 million of payment to creditors.