Holding The Line On Power

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CBS/The Early Show
It's power alert time again in California, with a stage two alert - signaling that electricity reserves are below five percent of capacity - in effect until at least Friday.

The California Independent System Operator (ISO), the group that oversees most of the state's transmission grid, imposed this latest alert on Wednesday and then extended it through 11:59 p.m. Thursday.

Another stage two alert was in effect on Tuesday.

California was plunged into rolling blackouts for two consecutive days last week when the ISO ordered circuit breakers shut to millions of Californians in a bid to avoid toppling the overstrained grid.

A shortage of hydro-electricity from the drought-stricken Northwest has also cut deeply into available supplies in California.

On Tuesday, the ISO said about 1,100 MW of power had been lost from Northwest power plants, which typically supply California about 11 percent of its total power generation.

One megawatt is roughly the amount of electricity needed to run 1,000 homes or small businesses at any given moment.

California has been struggling for months to keep the lights on, with a financial crisis among its investor-owned utilities and a woeful lack of new power plants leaving unmet the growing power needs of its 34 million residents and technology-driven economy.

Industry analysts point out that the state is vulnerable to blackouts this time of year, when many power plants take advantage of the mild weather and low energy demand to shut for maintenance.

Spring maintenance programs aim to put the plants in good running order for the long, hot summer, when air conditioning demand pushes electricity use to its annual peak.

The ISO has warned that California faces an energy shortfall of about 5,000 MW and could face up to 200 hours of blackouts this summer, when air conditioning accounts for about a third of the state's electricity use.

The news isn't well-received in Silicon Valley, particularly at fiber optic maker ONI Systems. As CBS News Correspondent Sandra Hughes reports, ONI is stretched to the breaking point. Though business is booming, expansion plans had to be shifted to North Carolina because it's too hard to attract qualified workers to the Golden State.

Hugh Martin, ONI's chief executive officer, says prospective workers keep asking about the power crisis, wondering if it will make economic sense for them to move to or remain in California.

At Hoppy's Brewing Company in Sacramento, owner Troy Paski says this week's 46 percent electricity rate hike could guzzle up their profits. Paski says the conditions are "ridiculous."

It's not just the rate hikes and the potential for rolling blackouts that have businesses in California worried about survival. They are already paying employees the highest minimum wage in the country, and worker's health-care costs recently spiked.

All this combines to make California businesse prime targets for out of state poachers. Some have launched mail-order campaigns like this glow in the dark mouse pad, a reminder of the power crisis. Others are running radio ads.

Michigan and Nevada are among the states casting lures into the California pool of businesses. Nevada needs only remind businesses that it's breaking ground on a new power plant next month, and in negotiation with five more.

"In this country, all's fair in business. I know that if the situation was reversed, I'm sure we would have California print and California radio over here 24 hours a day," said Somer Hollingsworth of the Nevada Economic Development agency.

Many California economists say a mass exodus isn't expected. The cost to move a businesses is high, and California still has other resources.