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Powerless state shuts down Silicon Valley

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DQW Bureau
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There has never been a day like Wednesday in Silicon Valley. Suddenly, at a few minutes before noon Wednesday, literally with the flick of a switch, Silicon Valley was shut down by the State of California.

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In the valley that created the electronic industrial revolution, not a single electron was running through its power grid. Workers strolled out into the streets, sat around reading papers or helped others get out of elevators. Some companies managed to keep vital servers running on UPS back-up power systems, and a few had their own generators to keep vital systems up.

For nearly two hours, the Valley and its 500,000 high-tech workers were completely disconnected from all outside power sources, causing massive losses in productivity both during the state-ordered black-out and afterwards. In an effort to minimize the impact on industry, state officials deliberately chose the lunch hour to shut power down in Silicon Valley. 

But not only were workers unable to get any work done during the black-out, afterwards, hungry workers flooded restaurants and cafeteria which had not been able to serve food either. When they finally returned to work, most spent considerable time rebooting computers and networks and recreating work lost when the power went out. 

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The state-ordered black-out, the first in California since World War II, resulted from a Stage 3 Power Emergency during which the State fell 800 megawatt short of power demand and out-of-state power companies refused to sell. State power authorities ordered rolling black-outs hitting different areas with 90 to 120 minute power black-outs in order to provide power to other parts of the state. 

In all, Silicon Valley companies lost an estimated $150 million in lost productivity. Although the blackout came without warning, California has been teetering on the brink of a power disaster for two months, operating in a Stage 2 Power Emergency mode on virtually every business day since November. 

The Wednesday power outage is likely to be only the first of many to come this year as the state braces for the hot summer season when even more power is required than during the relatively mild winter days. Already, high-tech companies are scrambling to move certain operations out of the Valley.

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State Legislators are considering a variety of solutions to deal with the crisis, including a take-over of power-generating plants and entering into power supply contracts with suppliers that would guarantee the state a sufficient supply of power. The current crisis has its roots in an ill-advised move by the State Legislature four years ago to de-regulate the State's energy industry. Previously, Pacific Gas & Electric and Southern California Edison, the state's dominant utilities, controlled the plants that generated the power to supply their residential and business customers throughout the state.

De-regulation forced then to sell the plants and purchase energy on the open market. The state anticipated that power companies would end up competing for the business in California, which is the world's sixth largest economic power if it were independent. But the glut of power didn't materialize and combined with a booming economy and population, a power shortage was created that forced the two utilities to purchase power from other states. Energy prices quickly skyrocketed to the point where the cost of a megawatt of power increased from $ 30 in December 1999 to $ 1,500 today. 

Under State regulation, PGE and Edison cannot pass on the extra cost of power to customers. Having lost more than $ 10 billion in the past two months,  both companies are now on the verge of bankruptcy, casting an even darker  cloud over the State's energy and economic future. As a measure of the desperate financial condition of the State's two major utility companies, SoCal Edison, which serves 11 million people, said it cannot pay $ 596 million in bills due now and will run out of cash February 2. 

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PG&E, which serves 14 million people, has less than $ 500 million in cash left and faces bills of $ 1 billion due next month. California's power problem is the first crisis that will confront President Bush as he takes power next week, and many are already billing it as a potentially defining moment for his political future. Bush can ill afford to let the California economy falter due to mostly as the result of power companies gauging the California utilities into bankruptcy and forcing costly black-outs. 

It would drag the overall US and global economy with it. Meanwhile, high-tech companies are bracing for more black-outs with some employers advising workers to bring a lunch as they will not tolerate them taking a lunch break after a two-hour power outage as was the case throughout the valley during this first outage.

(SVNS)

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