California's $4bn Energy Boost

Los Angeles, CA. -- - America's wealthiest state, California, has borrowed more than $4bn to keep the lights on as it battles a crippling power crisis.

The loan is to bolster financial reserves whilst the state prepares for a fundraising bond issue designed to ease its worst-ever energy crisis.

Forced to buy electricity on the open market after the power supply industry was deregulated and prices soared, some Californian utilities have found themselves on the brink of bankruptcy.

So grave is their plight that the generating companies have been refusing to supply them with power because they are worried the cheques will bounce.

So the state has had little option but to intervene, buying power itself in order to lessen the chance of blackouts.

But the bill is crippling - $45m a day from emergency funds.

Not only are electricity prices going up by 40% in order to cover the cost, but California's governor, Gray Davis, has announced plans to raise $10bn by issuing bonds.

The loan is an attempt to keep the lights on

But preparing for that issue will take time, and to tide it over, California is borrowing $4bn from merchant bankers J P Morgan, Lehman Brothers and Bear Sterns, paying around 5% on the loans.

The size of the bridging loan may rise. Officials say they are also talking to other lenders.

Later on Thursday, Mr Davis is due to outline his plan to solve the state's energy crisis in a televised address.

He is under pressure, with experts warning that power cuts could become more frequent during the summer as warm weather increases demand for air conditioning.

Source: BBC News