After months of warnings that California's energy levels were dangerously low, the state's energy crisis became very real to consumers last month when several blackouts interrupted service throughout the state. The situation worsened when California's largest utility company, Pacific Gas and Electric Company, a unit of PG&E Corporation voluntarily filed for Chapter 11 federal bankruptcy protection in San Francisco Bankruptcy Court on Friday, April 6, 2001.

The subsidiary reported that it has run up an $8.9 billion deficit buying electricity as of Feb. 28, 2001, and the state is expected to spend about $6 billion and will spend $16 more in bond issues to buy more electricity.

Economists expect this latest disaster, coupled with the financial woes of many San Jose and San Francisco-based technology companies, will discourage new businesses from locating to the state. Blackouts and brownouts, as well as the state's investigation into the private power suppliers, will affect new business development, says the UCLA Anderson Forecast. Other experts say San Francisco area housing prices will fall and unemployment will increase from 4.9 percent to 5.7 percent next year in a failing business lending climate. According to some estimates, California is responsible for as much as 12 percent of the nation's economy and a recession there can't help but impact the rest of the nation.

Analysts say the bankruptcy filings could contribute to more turbulence in the stock market Friday, which is reacting with volatility to some national news. Optimism had returned to the roller-coaster DOW and NASDAQ with an announcement by Dell Computers that it would stand by its projections, which traders took to be good news. Boosting the short-lived euphoria, was Lehman analyst Holly Becker's upgrade on trampled stock Yahoo!, which also lifted the technology sector to a gain. The Dow closed the day higher by 400 points and the NASDAQ posted its third-largest percentage gain ever. But, that was all over by Friday afternoon when the stock market plunged again on a weak March jobs report, rising fuel cost warnings, and more corporate earnings warnings by communications equipment makers Agilent, Telltabs and Sycamore.

The Labor Department said that a total 86,000 jobs were lost in March, and that the national unemployment rate has risen from 4.2 percent to 4.3 percent. Forecasts had been for 58,000 more jobs to be created in March, so rising job loss could be an indicator of an impending recession.

In other news, the Energy Information Administration also announced that U.S. drivers can anticipate paying more at the gas pump this summer, and warned that "the general tightness of domestic supply leaves the U.S. gasoline market vulnerable to sharp price run-ups if supply disruptions or bottlenecks occur." Estimates are that after last summer's price spikes, this year will be the second costliest for gasoline buyers in the U.S. since 1981.

Meanwhile, the housing market continues to offer some hope to investment minded borrowers. Mortgage interest rates ticked upward as investors moved money from bonds back into stocks last week, but they still remain well below inflationary rates.

Published: April 10, 2001

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