Saturday, January 20, 2001
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Posted on: Saturday, January 20, 2001

Hawai'i businesses monitoring California power crisis

By Sally Apgar
Advertiser Staff Writer

United Airlines, which has major hubs in San Francisco and Los Angeles sending flights to Hawai
i, expects no major disruptions in service through the weekend despite the deepening power crisis in California.

But United and other businesses with Hawaii connections are watching the developments in California closely.

Businesses and experts said yesterday that it is too early to tell whether the power crisis will affect Hawaii’s economy. But if the shortage continues and causes the California economy — the nation’s largest — to founder, Hawaii and other states could also stumble.

The major problem for United, one of many businesses with Hawaii operations that potentially could be affected, is that power failures like those Wednesday and Thursday disrupt the operation of pipelines through which jet fuel is pumped. A spokesman for the airline said yesterday that it has taken "extraordinary actions" to ensure an adequate supply of fuel.

"Flights are going. This isn’t affecting Hawaii," said Norm Reeder, managing director for the airline in Hawaii. "San Francisco and Los Angeles are still functioning normally."

Other businesses said they had felt no effect from the California crisis. A spokesman for Matson Navigation Co., the dominant ocean carrier serving Hawaii, said yesterday the company has not been affected by the power failures or shortage at its ports in Oakland and Los Angeles.

Gerry Keir, a spokesman for First Hawaiian Bank whose parent, BancWest Corp., owns 118 Bank of the West branches in California, said that the power shortage has not been felt at bank operations so far. He noted that the bank is not a lender to California’s two primary utilities, which have said they are facing bankruptcy as the crisis continues.

Still, Keir said the power crisis potentially could affect the bank’s bottom line by driving up the cost of utility bills at the branches.

Pearl Imada Iboshi, the state’s chief economist, noted that California was the source of 20 percent of the 6.3 million visitors that Hawaii saw through November. If consumer confidence in California ö and elsewhere ö dampens because of the power crunch, it could hurt Hawaii tourism.

But, she said, "it is probably too soon to feel the impact (on Hawaii’s economy). Slower growth in California would certainly negatively impact us. But California hasn’t even seen that (slower growth) yet."

Leroy Laney, an economics and finance professor at Hawaii Pacific University’s School of Business Administration, said he does not believe the crisis will have a significant or pervasive effect on Hawaii.

Laney said he is more worried about the potential effect of the weak performance of the stock market during the last three quarters and the possibility of a national recession. He said that would weaken consumer confidence and hurt tourism. And if California and the nation’s high-tech companies are hurt, it could also stem the strong flow of real estate investment on Oahu and the Neighbor Islands.

Yesterday, California continued to struggle with its energy issues, averting what would have been a third consecutive day of intermittent power blackouts. State authorities declared their highest power alert after reserves fell to within 1.5 percent of demand. Power failures are "possible" in the wake of the alert, according to a statement from the California Independent System Operator, which runs three-quarters of the state’s power grid.

The energy crisis in California has its roots in a 1996 utility deregulation law that capped the rates utilities — including the state’s two largest, Pacific Gas & Electric Co. and Southern California Edison Co. — can charge consumers until March 2002.

Rising demand and short supplies have meant the utilities are paying more to power generators than they can charge consumers. The price of power to California utilities more than quadrupled last year because more than half of the power plants in the state burn natural gas, the price of which has surged dramatically.

Because of the cap and high costs, the two utilities have amassed more than $11.5 billion in power-related debt. Out-of-state suppliers now are reluctant to sell them electricity and natural gas, fearing they will not get paid. Yesterday, U.S. Energy Secretary Bill Richardson, who steps down today, signed an emergency order requiring natural-gas producers to sell in California.

The Associated Press and Bloomberg News contributed to this report.

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