Californians are known to love a good, gory accident scene, but for those of us who like our violent smashups to be more metaphorical than real, the 2000-01 electrical power crisis is the gift that keeps on giving.
The latest near-corpse about which the paramedics are hovering is Calpine Corp. At this writing, the San Jose power company is wheezing toward an expected bankruptcy filing in January, possibly followed by extinction.
On Nov. 29 its founder and chief executive, Peter Cartwright, and its chief financial officer, Robert Kelly, were dismissed by the board of directors. Because they were leaders of Calpine's efforts to stay alive by selling assets, the expectations are that Chapter 11 is looming.
Calpine's problems are deeply rooted in the power crisis. For years after Cartwright founded the company in 1984, it focused on generating renewable energy, especially at its vast Geysers geothermal facility north of San Francisco. Then, in the late 1990s, California deregulated its energy market in what was viewed as a harbinger of a nationwide trend.
California's idea was to encourage its utilities to divest their own generating plants and buy power instead from independent operators. The utilities would concentrate on transmission and distribution of electricity, and the independents would build and operate plants. Somehow the purveyors and distributors would all make more money while the customers paid less, a creation of value from sleight of hand worthy of a conjurer's act.
Calpine became the most aggressive of the new breed of generating company, embarking on a nationwide construction and acquisition spree using billions in borrowed cash. Its portfolio eventually encompassed 93 plants.
But the deregulation scheme proved a disastrous miscalculation. By 2000 the California power system had become a plaything for unscrupulous energy traders like Enron. Pacific Gas & Electric Co. landed in Bankruptcy Court and Southern California Edison came close. Customer bills soared. The market on which Calpine and other generating companies depended blew apart.
But Calpine's momentum couldn't be slowed. In 2001, the company brought three new power plants into operation in California alone. It had 27 plants under construction nationwide, including three more in California, and an additional 34 on the drawing board. It floated $18.2 billion in new debt during the year while the three major credit agencies \o7raised \f7their\o7 \f7ratings on Calpine. Its stock peaked above $57.
