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General Background UC Santa Cruz and the California Energy Crisis California is in the midst of an energy crisis precipitated by deregulation and an increasing demand for power. The factors leading to so-called "rolling blackouts" are not short-term in nature. Rather, state and utility officials predict that the current power crisis could continue for at least the next two years, even with the intervention of state government. That means that we can expect future power outages and higher rates for natural gas and electricity. Here is some background information on the way in which our rates for natural gas and electricity are set. The University of California participates in contracts for these utilities through the State General Services Administration. Electric rates are currently capped through March 2002 under a contract with Enron. The statewide contract for natural gas expired in June 2000 and the GSA elected to buy this utility under short-term contracts rather than long-term. The reason for this was that the gas providers wanted to lock in very high rates under a long-term contract. Therefore, while it still costs more for gas than it did early last year, it is hoped that the price will decline over the next year to the point where another long-term contract makes sense. However, we can be certain that the price will not again drop to the low levels to which we were accustomed. UC Santa Cruz is working with the Office of the President regarding the financial impacts of these higher rates. The increase in the cost of natural gas also has impacted the company that provided our campus with co-generation (e.g., the use of natural gas to provide heat for the boilers as well as generating electricity that was sold back to PG&E). Due to the cap on electrical rates and the increase in the cost of natural gas, the company--Santa Cruz Cogeneration, located in Fairfield--has shut down both of the cogen plants it operated on our campus: the main plant that provided heat and backup electricity to the campus core; and the smaller plant that generated heat for the East Field complex. Santa Cruz Cogeneration has indicated that it will not resume operations for the first two months of the calendar year. The occupants of the buildings that the main plant supported were notified of the company's plans before the shutdown and they have begun to take steps to provide backup power to critical research operations. We are also looking at possible solutions to the co-gen shutdown. Later this month, representatives from the campus will meet with the company and their lender to discuss the situation.
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