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Morning News

Power Crisis: Effect of Waning Supplies in California Felt By Consumers

Aired January 4, 2001 - 10:01 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LEON HARRIS, CNN ANCHOR: The economic shot in the arm yesterday may also be subject to a shot in the dark. Waning power supplies in California have created a crisis that reaches far beyond the state's borders and well into your wallet.

CNN's Greg LaMotte explains.

(BEGIN VIDEOTAPE)

GREG LAMOTTE, CNN CORRESPONDENT (voice-over): If you haven't been paying attention to California's energy crisis, you'd better. You may soon be paying more for clothes, food, even flowers, just to name a few. Energy sensitive businesses in California are getting hammered by skyrocketing energy prices, and somewhere along the line you know who's going to pay.

JACK KYSER, ECONOMIST: If California catches a cold, definitely the rest of the United States is going to sneeze.

LAMOTTE: Utility bills have tripled to $600,000 a month at this Los Angeles textile dyeing plant. The clothes produced from the fabric here could wind up in your closet.

BARRAM FARMANARA, CEO, TISSURAMA DYE: I don't think any dye houses with the competition of the goods coming from overseas be able to absorb this increase in prices.

LAMOTTE: Do you like dairy products? California is the largest dairy-producing state in the nation and second only to Wisconsin in cheese production. It is a highly energy-intensive industry. That's why you may see cheese prices start to climb.

LARRY JENSEN, LAPRINO FOODS: Cheese is a national marketplace, and therefore, to the extent that we incur costs in California, we may or may not be able to recover them from the marketplace.

LAMOTTE: California's No. 1 industry is agriculture. Fruits and vegetables grown here are shipped around the country. The price for refrigeration, among other things, is affecting the bottom line.

It's the cost of heating greenhouses that's affecting the folks who help supply the nation's flower shops. Robert Echter's energy bill has doubled to $20,000 a month. ROBERT ECHTER, FLOWER GROWER: It eliminates our product. We're now running in the red.

LAMOTTE: California's huge manufacturing industry, including aerospace, aluminum, and, of course, the state's Silicon Valley are all taking an economic hit.

JAKE STEWART, MANUFACTURERS & TECH. ASSN.: What's happening is that you're seeing companies shut down because they just can't economically operate under those conditions.

LAMOTTE: Kaiser Aluminum in Washington State decided that if you can't beat them, join them. The company sent its employees home with 70 percent pay, and is reaping hefty profits selling its electricity rather than using it to make aluminum for far less.

SUSAN ASHE, KAISER ALUMINUM: For this month, I think we stated in our announcement that the proceed would be around $50 million.

LAMOTTE: Just about everyone involved in California's energy crisis seems to agree the deregulation of the state's power industry has so far been an economic disaster.

And if potentially higher prices for a whole host of products isn't enough to grab your attention, maybe this will: Half of the states in the nation are in the process of deciding whether to deregulate their utilities.

(END VIDEOTAPE)

LAMOTTE: We are in a control room of electric generating station. It used to be owned by Southern California Edison. But when the state went to deregulation in 1996, all the utilities were forced to sell off their electric generating stations. It is a massive facility that feeds electricity to about 2 million homes. This is the plant where electricity is made and sent out over lines known as the grid, eventually getting to consumers and businesses.

This control room is like being in a space station. I mean, all these buttons, I want to be like a little kid and kind of like press on some of these things to see what happens, but I don't think you want me doing that.

This is Rodney Daigle. He is a power plant specialist.

What I'm wondering, Rodney, is you work at the power plant, when you go home, when you go to the store, are people saying, hey, what's up with this energy crisis in California?

ROD DAIGLE, CONTROL ROOM OPERATOR: Yes, I do get some of that sometimes, yes.

LAMOTTE: What are they asking you?

DAIGLE: Is it real? What happened? Why is it different than it was a couple years ago? Those things. LAMOTTE: It is real?

DAIGLE: Yes, it is, it is. My understanding is there's about 35 percent less supply than there is for the demand right now.

LAMOTTE: What's the one thing about electricity and its generation and getting into our homes that you think most people don't know that maybe they should?

DAIGLE: Well, it's an educational level. I think a lot of people don't realize the -- where electricity comes from, what it's made. They assume it just -- it's something that comes right out of the wall and don't understand the process behind it.

LAMOTTE: If you could tell us very quickly, what do you think is the answer to this power crisis?

DAIGLE: Conservation right now. More generation to get the supply back up to equal the demand would help a lot.

LAMOTTE: Well, one thing that's going to happen later today is the California Public Utilities Commission is expected to approve a rate increase of 9 percent for residential customers and 7 to 15 percent for industrial users, depending on the size of the business. That 9 percent for residential customers will amount to an average of about $5 a bill. That doesn't seem like much, but, for instance, people on fixed incomes, $5 a bill can seem like a lot. That's expected to happen later on today -- Leon.

HARRIS: All right, thanks much, Greg. We appreciate it.

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