California’s economy is already hurting households and businesses

California's economy is already hurting households and businesses

With potential recession looming, California estimates $25-billion deficit next year

The recession is already starting to weigh on California. The recession is already starting to weigh on California

SACRAMENTO — In California, the economic downturn is already hurting households and businesses. The state’s economy grew at an annual rate of 3.5 percent last year, only slightly above its average annual growth rate of 3.2 percent since 2000. Still, California officials worry that state revenues will shrink this year for the first time in 11 years as a result of the national recession.

In addition, California state budget watchers predict that the state will run up a $25 billion deficit in 2011. The fiscal uncertainty has weighed on real estate markets across the state, which is projected to lose $5 billion in annual real estate values.

The California Independent System Operator, or CAISO, estimates that the statewide grid is likely to lose as much as $5.2 billion in grid system value over 18 months to the end of the decade due to this recession. The loss in grid value is mostly due to lower natural gas production and higher electricity consumption, according to CAISO estimates, which will cut power demand and reduce the state’s energy supply.

The California Public Utilities Commission (CPUC), which regulates the state’s utilities, including Pacific Gas & Electric Co., the biggest single investor-owned utility in California, projected last week that the state can expect a net loss of $300 million in revenues over the next 15 months.

Many public utilities in California, including PG&E Corp and Southern California Edison, have been forced to take extraordinary measures to avert a grid meltdown. In the case of PG&E, it is using a sophisticated battery system in its Diablo Canyon gas plant to help manage the power supplies for the state. The utility has already invested more than $700 million in energy storage in California, which is also expected to add $300 million to the utility’s $3.5 billion annual operating costs in the near future.

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