"Until now, Democrats have thwarted attempts to fashion a national energy policy that would give incentives for more oil and gas drilling ... ""The biggest problem in California is that consumers are still not [responding properly to the 'free market']," Enron Corp chairman Ken Lay announced. ""They are not changing behavior so the problem is going to get worse. Painful as it may be, they need to start modifying their behavior ..." Clinton declares natural gas supply emergency in California By Tom Doggett WASHINGTON, Jan 19 (Reuters) - President Bill Clinton declared a natural gas supply emergency in California on Friday, and ordered out-of-state suppliers to continue selling gas to California's largest utility to fuel electric generation plants. Clinton directed Energy Secretary Bill Richardson to issue a federal order requiring firms to supply natural gas to Pacific Gas and Electric <PCG.N>, which is teetering on the edge of bankruptcy. Richardson said the emergency order, which expires at 3 a.m. EST (8 a.m. GMT) on Jan. 24, was issued after PG&E said several energy firms refused to sell it gas on credit because they feared the utility would be unable to pay for the gas. "I am very concerned that such supply disruptions could endanger the health and welfare of PG&E's residential and commercial gas customers and could exacerbate the already precarious condition of California's electric grid by eliminating fuel supplies to a number of generating plants," Richardson said. The electricity shortage in the nation's richest and most populous state will be among the immediate issues facing President-elect George W. Bush when he takes office Saturday. A key energy adviser to Bush said the federal government should limit itself to an "advisory" role and let California state lawmakers resolve a complicated problem that was mostly self-inflicted by a flawed deregulation plan. "The biggest problem in California is consumers are not going to see the price signals. If they don't see the price signals, they are not changing behavior so the problem is going to get worse," Enron Corp <ENE.N> chairman Ken Lay told reporters. "Painful as it is, they need to see the price signals and start modifying behavior to reduce demand until we get new supplies," he added. PG&E and Edison International <EIX.N> have warned federal and state officials they face bankruptcy because California's landmark 1996 deregulation law does not allow them to pass on the tenfold leap in wholesale power costs to consumers. California's woes have also been exacerbate the also have not been helped by the fact that practically no new power generating plants have been built in the state for the last 10 years -- a period during which the population and the economy have boomed, greatly increasing demand for electricity. NATGAS NEEDED TO KEEP UTILITY RUNNING California Gov. Gray Davis, a Democrat, asked Clinton last weekend for the emergency natural gas supply order, before the state was hit with two days of rolling blackouts and a widening power crisis. Residents in many cities have had to cope with the loss of traffic lights, automatic teller machines, elevators and computers during the rolling blackouts. Richardson said the Energy Department would take legal action against firms that did not comply, saying: "There will be enforcement action if the order is not carried out." On Thursday, PG&E said its deteriorating credit rating could force it to drain all its natural gas in storage by early February because suppliers have balked at providing more. The Clinton administration has also tried to help ease the California crisis with a separate order issued on Wednesday that forces out-of-state power generators to sell extra electricity to PG&E and to Edison International <EIX.N>. BUSH READY ON ENERGY ISSUES Richardson said he had briefed his successor, Spencer Abraham, on the California crisis. Abraham, a former Michigan senator, was expected to win swift confirmation by the U.S. Senate as Bush's choice for energy secretary. Richardson said Abraham was prepared, saying: "They are ready to act." He did not elaborate. On Thursday, Abraham testified before the Senate Energy committee but refused to say what options, if any, the Bush administration was considering to help solve the crisis. The California state legislature met this week to try to work out a solution that would cap wholesale power prices at a more reasonable level and let utilities sign long-term supply contracts. Longer term, industry experts say the state must ease environmental restrictions and allow more power plants to be built to meet demand in California. On Friday, the state was still on a so-called "Stage 3" alert for critically low electricity supplies, but officials said they hoped to avoid more blackouts during the day. Congress indicated it would also move on energy issues. Sen. Trent Lott, a Mississippi Republican who will resume his post as Senate Majority Leader next week, told reporters that lawmakers would have to take up energy issues this year. Deep divisions between Democrats and Republicans have thwarted attempts to fashion a national energy policy that would give incentives for more oil and gas drilling, encourage conservation and improve fuel efficiency standards. "I think energy is big and I think we need to get to it quickly," Lott said.
