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California

Utility Stocks Feel Heat as Debt Ratings Go South

September 20, 2000|NANCY RIVERA BROOKS | TIMES STAFF WRITER

California's electricity grid avoided heatstroke on Tuesday, but the state's utility stocks wilted as two debt-rating agencies changed their outlook to negative because of rising debt tied to the high wholesale price of electricity.

Slightly lower-than-expected temperatures and enthusiastic statewide conservation kept power demand lower than anticipated, said Stephanie McCorkle, of the California Independent System Operator, which runs the electricity grid for about 75% of the state.

Cal-ISO declared a Stage 1 emergency Tuesday morning when power reserves briefly fell to about 5% but did not need to call a Stage 2, as it did Monday. The state came close to the rotating blackouts of a Stage 3 emergency Monday, which is declared when reserves fall below 1.5%.

Calls for conservation Monday and Tuesday prompted the Mervyn's department store chain to reduce lighting by half at more than 100 California stores, much as grocers and drugstores around the state have done. Conservation by state facilities, including colleges and universities, pulled 180 megawatts off the grid, enough electricity to serve about 180,000 homes, McCorkle said.

Utility stocks got zapped Tuesday on the lowering of their rating outlook to negative by the Standard & Poor's and Fitch debt-rating agencies. On the New York Stock Exchange, Edison International fell $1.48 to $22.38, PG&E Corp. slid $1.79 to $25.88 and Sempra Energy slumped 55 cents to $19.50.

Fitch lowered the ratings outlook on the utility arms of the companies: Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. S&P lowered the outlook for Edison International and PG&E Corp., and subsidiaries Edison Mission Energy and PG&E Generating Co.

The agencies cited financial challenges caused by high wholesale electricity prices and the companies' uncertain outlook for recovering those costs because of consumer rate freezes. Moody's took similar action last week.

Meanwhile, the California Energy Commission has received the first application to add so-called peaking power to the state grid under newly streamlined power plant licensing rules.

A Texaco Inc. subsidiary seeks to build a 320-megawatt peaking plant that would supply electricity during times of highest demand, said Claudia Chandler, the energy commission's assistant executive director.

"We're going to try to license this plant in six months or less," Chandler said.

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