Rolling power blackouts darken California

The scattered outages started at 11:31 a.m. PST and are expected to worsen during peak demand time--from about 5 p.m. to 9 p.m.--as countless street lights flicker on and residents come home from work, announced the California Independent System Operator (ISO). ISO manages the power grid that transmits 75 percent of the state's power.

The blackouts are expected to hit Southern California around 4:30 p.m. and to last throughout the early evening, the ISO confirmed. "Rolling blackouts" are hour-long outages that rotate among customers in hopes of avoiding a total power failure.

Unless California businesses and residences dramatically curtail their energy usage in the coming hours, the ISO managing director Jim Detmers warned that the blackouts will continue Thursday. The ISO expects demand to heat up at about 7 a.m., when residents start waking up, turning on lights and turning up the heat.

"The supply condition we are dealing with, the shortage, still exists...so again we're asking for conservation," Detmers said. "It's very necessary, a very critical operation, and it's very, extremely serious."

Terry Winter, chief executive of the ISO, said it is impossible to predict when the rolling outages will cease. If it rains heavily in the area--largely reliant on hydroelectric power--the threat of blackouts will likely subside.

"I don't know if it will be for three weeks or eight weeks or one week," Winter said. "Each day we have gotten so close that we have been literally minutes away from doing what we had to do today...We just have to play this day by day."

Population boom to blame
Although California's two largest utility companies are teetering on bankruptcy, experts said that the blackouts are due to a lack of supply because of the cold winter and the exploding population in urban areas such as San Francisco, Portland, Ore., and Seattle.

The blackouts would have happened regardless of the utilities' cash-flow problems, Winter said, adding that he doesn't know of any power suppliers who are withholding energy to utility companies for fear of not getting payments.

California and the Pacific Northwest have had an unusually cold winter, forcing residents to turn up the heat sharply and causing a spike in demand. At the same time, the entire western half of the United States has had dramatically less rainfall than usual throughout the winter. That means that California, the nation's most populous state and the center of the nation's technology industry, cannot rely on hydroelectric power.

In addition, Winter said, there was a breakdown at a coastal power plant around 11:30 a.m., which sparked the blackouts. Roughly 60 percent of the region's power plants are more than 30 years old, and breakdowns are occurring with more frequency.

"It's not a very pleasant day today for California," Winter said. "I don't ever recall us calling for this amount or magnitude of outages before."

The first rotation of blackouts on Wednesday shut off 500 megawatts of electricity in Northern California. The blackouts, which will continue throughout the afternoon, are expected to hit about 500,000 customers from Bakersfield to the Oregon border throughout the afternoon, said Jon Tremayne, spokesman for Pacific Gas and Electric.

San Francisco neighborhoods were among the first without power Wednesday morning. Streetlights and storefronts in the historic Haight-Ashbury area went out, and tourist shops near the popular Fisherman's Wharf area in San Francisco were also in the dark.

"They're scattered throughout our entire service area...and we literally have circuits throughout the entire area that are impacted," Tremayne said.

He wouldn't say how many Silicon Valley technology companies were in the dark, but clearly the power crisis has tested the patience of many tech workers.

During a Sun Microsystems news conference at a hotel in downtown San Francisco on Wednesday afternoon, the power went out and a backup generator malfunctioned, forcing the company to delay its scheduled announcements. Although the ISO said that phone lines would not likely be affected, dial-in access and satellite links failed during the event.

Meanwhile, Apple executives warned analysts during a conference call that if the event was interrupted by a power outage they would attempt to restart it as quickly as possible, using cell phones if necessary.

In addition, CNET News.com received e-mail from some Apple employees saying parts of the Cupertino campus had lost power. Company representatives would not say whether there were outages.

Sunnyvale, Calif.-based Loudcloud, which provides Internet infrastructure operations for corporate clients, went dark at about 12:15 p.m., and the power came back about 2 hours later.

"We are one of those companies that customers rely on to keep their Internet operations up and running, so we've been getting lots of calls," said Loudcloud spokesperson Charlotte Harrington. "One of the primary reasons customers go with a Loudcloud solution is to put the whole process in someone else's hands, no worries. When the power went out, my computer went dark, but our customers stayed up."

Loudcloud?s Network Operations Center monitors the Web sites of the company's customers, which include Nike.com and Britannica.com. When it detected power interruptions this afternoon, the company's backup battery kicked in. A diesel generator, which has the ability to run constantly for up to 36 hours, then took over.

A shadow on the Valley
The energy crisis is likely to sting other Silicon Valley technology companies. The energy supply to utility companies other than PG&E in the tech-heavy San Francisco Bay Area has also been curtailed. Tech companies that rely on the popular Sacramento Municipal Utility District and Silicon Valley Power will experience the same magnitude of blackouts as PG&E customers.

E-commerce companies that rely on smoothly functioning Web sites, often powered by servers in the San Francisco Bay Area, lose anywhere from $1 million per hour to $1 million per minute when the power goes off. That's because customers can't place orders online, and the region's highly paid work force can't be productive.

Although it was not caused by a blackout, a November blowout at Seattle-based e-tailer Amazon.com showed how costly even a brief outage is. During the Thanksgiving holiday weekend, Amazon suffered a series of outages. Investment firm Thomas Weisel Partners estimated that one 20-minute outage deleted roughly 20,000 product orders and $500,000 in revenue.

The financial situation seems even more dire for California utility companies.

The outage comes as power providers have threatened to hold back supply from the state's two largest utility companies, PG&E and Southern California Edison. Both companies have said they will go out of business unless they are able to dramatically increase the price consumers pay or unless providers radically cut the cost of energy.

Edison International and its Southern California Edison subsidiary defaulted Tuesday on a $596 million loan owed to creditors, raising the stakes in a showdown between regulators, utilities and power-generating companies in California. The crisis: Who will pay the mushrooming energy bill for California, home to many of the world's largest technology companies?

Southern California Edison, which serves 11 million people, announced this week that it will run out of cash Feb. 2. PG&E, which serves 14 million people, had just $500 million in cash left as of Jan. 10 and faces bills of $1 billion due next month.

The Southern California Edison default prompted Standard & Poor's to downgrade the credit ratings of Southern California Edison and PG&E to junk-bond status. PG&E and Southern California Edison have lost $12 billion in the past several months.

California has struggled for months with the effects of deregulating its electricity market. A rate freeze has banned utility companies from passing on higher wholesale costs to customers.