For the first time since the energy crisis petered out three years ago, energy consumption is starting to bump up against the limits of supply. On Thursday the state avoided a fourth straight day of record electricity usage -- but supplies were tightened by the unexpected shutdown of a major Pacific Gas and Electric Co. generating plant due to an equipment malfunction.

Although blackouts aren't expected, the heat wave is expected to continue the energy squeeze through next week, and the state's cushion of surplus power is dipping uncomfortably low. Officials were urging Californians to conserve as much as possible.

"Things are going to get tighter and tighter as we go through the summer," said Jim Detmers, the acting chief operating officer of the Independent System Operator, the quasi-governmental agency that runs California's electric grid.

This week's drama demonstrates that the balance between supply and demand remains fragile -- and that the state is still not completely over the energy crisis. Because lawmakers and regulators haven't yet settled on a new, post-crisis design for the state's electricity market, investors are reluctant to pour money into new power plants.

While some plants have opened since 2001, and several more are under construction, 13 plants have been put on hold or canceled for lack of investment.

"We need to see some certainty in the market," said spokesman Bill Highlander of Calpine Corp., the San Jose-based power plant developer. He said lack of financing prompted Calpine to put in limbo about 3,600 megawatts worth of proposed new plants. A megawatt is enough power to supply about 750 homes.

Demand is a problem, too, as usage has surpassed expectations. Instead of the predicted 3.5 percent to 4 percent increase in consumption this year, usage is growing at 6 percent, said ISO spokeswoman Stephanie McCorkle. That's largely a function of population growth and an improving economy, while triple-digit temperatures are causing spikes in demand.

"You really can't test how much electricity demand is out there until you hit a heat wave, and this is our first real heat wave of the summer," said McCorkle. "The appetite for electricity has grown enormously over the past year."

Meanwhile, Detmers said California is burning through "an extensive amount of hydroelectric power." And energy shortages in cities like Phoenix are reducing the amount of imported power available to California, he said.

Experts say the situation will get iffier the next two years as demand mushrooms.

Bruce Williams, chief executive of electricity generator Dynegy Inc., said in a recent interview that 2005 "is going to be worse, and '06 is going to be worse than that."

Thursday was another near record, as Californians used 42,291 megawatts at 4:20 p.m., according to the ISO. That compared with the record of 44,360 megawatts, consumed late Wednesday afternoon. The figures cover the electricity used by the investor-owned utilities but not public entities like the Sacramento Municipal Utility District.

SMUD spokeswoman Dace Udris said energy use in SMUD territory has been high but hasn't hit the all-time high of 2,809 megawatts, recorded last July.

Continued high temperatures made for a tense day at ISO's control room in Folsom. The shutdown of one of the two operating units at PG&E's Diablo Canyon nuclear plant took 1,100 megawatts out of commission.

PG&E spokesman Bill Roake blamed the shutdown on a small leak in a pipe that delivers coolant water to the unit. A Nuclear Regulatory Commission senior inspector, David Proulx, told the Associated Press there was no danger.

Meanwhile, Detmers said several smaller plants around the state also went down, although the total number of megawatts unavailable wasn't unusually high.

The saving grace was a Bay Area fog bank that left temperatures in the East Bay and South Bay a little lower than expected. "When those (areas) cool off by even a couple of degrees, it saves us 500 megawatts," McCorkle said.

Temperatures hit the 90s Thursday in much of the Central Valley and inland Southern California.

But California is hardly out of the woods. Although demand should start falling today -- many people take Fridays off in summer -- Monday's usage is expected to set another record. Temperatures will be high and that's when office air conditioners are revved back up after a dormant weekend, causing added strain on the system. "We call it the 'Monday morning pull,'" McCorkle said.

"Monday is going to be our biggest hurdle yet this year," she added.

And it's not clear how soon the Diablo Canyon unit will return to service. The ISO is counting on the plant to resume generation by late Sunday, but Roake would only say operations will resume "within the next few days."

The looming shortage has its roots in the energy crisis and its aftermath. Power plant development slowed down significantly when wholesale energy prices collapsed -- and the demise of Enron Corp. made Wall Street enormously skeptical of all energy suppliers. Companies were forced to restructure their debts. Georgia-based Mirant Corp., one of the big generating companies, followed Enron into Chapter 11 bankruptcy protection.

Some 7,200 megawatts worth of generation have been added to California's supply since 2001. But construction is slowing because of confusion over how the state's electrical system will operate in the future -- and a tug of war between the hometown utilities and the independent power generators over who will build the new plants.

Southern California Edison is pushing AB 2006, by Assembly Speaker Fabian Nez, D-Los Angeles, which would give utilities greater assurance that they could recover their investments in new plants by passing costs to ratepayers.

Calpine and other "merchant" generators, which sell power to the utilities, say AB 2006 would give the utilities too much of a guarantee that they can recover their costs. As a result, the merchants argue, the utilities would build plants themselves, effectively locking the merchants out.

Gov. Arnold Schwarzenegger hasn't taken a position on AB 2006 but wants an "competitive procurement process" for determining who builds new plants, according to an aide. The aide, who would only speak on condition of anonymity, said Schwarzenegger's main interest is that plants be built as cheaply -- and quickly -- as possible.

With this week's heat wave demonstrating that shortages loom on the horizon, the aide noted that Schwarzenegger has been pushing the Public Utilities Commission to adopt procurement rules as soon as possible.

For now, the result is gridlock as California struggles to design a new system and investors wait on the sideline. There are 4,900 megawatts worth of plants under construction, according to the California Energy Commission -- but another 5,600 worth that have received their state permits are on hold.