Lines in need of repairs

April 25, 2001

By KATE BERRY The Orange County Register

Southern California Edison has made no major upgrades to its transmission lines in more than 10 years, raising concerns that consumers will have to spend as much as $1 billion on improvements to the lines whether the state buys them or not.

Since Gov. Gray Davis cut a deal two weeks ago to buy a portion of Edison's lines for $2.76 billion, lawmakers and energy experts are questioning why much-needed repairs to the system haven't been made.

The state's Public Utilities Commission has held hearings to determine trouble spots on the grid. Last month, the PUC identified 51 weaknesses on California's transmission lines, some of them in Edison's territory, and an additional 107 problem lines that could disrupt reliability over the next four years.

Larry Grant, vice president of engineering and technical services at Edison, justified not making investments in the transmission lines because there was less stress on the grid before deregulation took effect in 1998.

"There probably needs to be expansions to the system. But it's not because we neglected it," he said. "It's because of the shift in the way the system is used today."

Before deregulation in 1996, Edison rarely sent power to Northern California, which is served by the state's largest utility, Pacific Gas & Electric. But last year, when PG&E needed power and could not count on imports from the Pacific Northwest, Edison was required by the state's grid operator to transmit electricity north. Most of the transmission bottlenecks that have contributed to rolling blackouts are in PG&E's territory.

"If the state owns the transmission system, then they would be the ones responsible for the upgrades and expansion," Grant added.

LAWMAKERS WARY OF COST OF REPAIRS

Lawmakers who need to approve the state's purchase of Edison's transmission lines are wary of the cost.

As part of the deal with the state, Edison has proposed that ratepayers also pay for $3 billion in upgrades to 6,000 miles of low-voltage distribution lines that it will keep. Those lines are separate from the massive steel towers and high-voltage lines the state would buy under the agreement. So far, there is no estimate on how much customers would have to pay monthly for the upgrades.

"There is a concern among many members in both houses about the price tag for repairs," said Sen. Joe Dunn, D-Santa Ana. "Everybody is fearful that these are unknown costs and we don't know how extensive they will be."

EDISON UPGRADES DONE IN 2000 RELATIVELY LOW

Last year consumers paid Edison roughly $2.5 billion, through charges on their electricity bills, for costs for both its high-voltage transmission system and local distribution lines. Only a fraction of the revenue, or about $100 million, was spent on upgrades to the high-voltage transmission system, which generated about $240 million in revenue for Edison last year.

By contrast, Edison spent about $600 million on repairs on nearly 100,000 miles of low-voltage distribution lines, which deliver power directly to 4.3 million customers. Those lines generated about $2.2 billion in revenue for Edison last year.

The utility earns a guaranteed profit of 11.6 percent on its investments in transmission and distribution. It's entitled to charge roughly 3 cents a kilowatt-hour, or 25 percent of the electricity cost on consumers' bills, to get that return.

The state's Public Utilities Commission has quietly launched an investigation into whether the state's three largest utilities - Edison, PG&E and San Diego Gas & Electric - are in compliance with regulations covering transmission and distribution lines, including maintenance, safety and investment requirements.

Regulators are trying to determine whether the utilities made strategic decisions not to invest in their transmission lines, leading to bottlenecks on the system that have caused blackouts.

UNRELIABLE GRID COULD EXACERBATE BLACKOUTS

The reliability of the state's transmission grid will be critical this summer because equipment failures and traffic jams contribute to outages and blackouts.

The condition of the transmission lines is also bad news for ratepayers, who will most likely end up paying for upgrades to Edison's system - whether the state purchases the lines or not. Estimates by the PUC and Edison indicate that up to $1 billion will be needed to upgrade and expand Edison's transmission lines over five years, and $2.5 billion will be needed for all the utilities combined.

"If the utilities don't maintain the system, you'll see more unscheduled outages," said Armando Perez, director of grid planning at the California Independent System Operator, which oversees the utilities' five-year plan to add new transformers, substations and lines to the system. "Something gets broken because they didn't do the maintenance. If the state owns them, then the state will have to pay for them."

Under the agreement with Edison, the state would purchase 6,000 miles of high-voltage lines - the massive steel towers and wires that move power through California at currents of as much as 500,000 volts. That power is funneled through transformers and substations, where the power is "stepped down" to the low-voltage poles and wires on city streets. The utility plans to keep its low-voltage distribution lines and 900 of its 1,000 substations.

Transmission bottlenecks weren't a problem before California deregulated its electricity market.

But deregulation and a tighter power supply forced the utilities to share electricity and ship it throughout the state, even though much-need upgrades were never made or planned, said Mark Ziering, energy reliability coordinator at the PUC.

"There are points where transmission can be very, very crucial," Ziering said. "But the (PUC's) current (rate-making) methodology doesn't take into account what people are willing to pay for reliability. It's always the issue of what would you be willing to pay to prevent a blackout."

MOST OF THE PROBLEMS ARE IN PG&E TERRITORY

Most of the difficulties occurred in PG&E's territory. The company filed for bankruptcy April 9.

"We know the grid is in urgent need of upgrade and expansion, and we know that bankrupt utilities aren't going to make those investments," said Peter Navarro, an associate professor of economics at the University of California, Irvine.

The most egregious problem in California is in a series of lines known as Path 15, which links Northern and Southern California. Under deregulation, Edison was required by the grid operator to send power north, through Path 15, when PG&E could not import enough power from the Pacific Northwest.

Problems on Path 15, which is owned by PG&E, were a major cause of blackouts in Northern California last year.

The constraints caused both utilities to lose access to cheaper power and increased their operating costs. It also threatened the ISO's ability to maintain power reserves and forced the grid operator to order rotating outages.

"These are big policy issues, and the industry doesn't have a real good handle on how to deal with these problems yet," Ziering said.

http://www.ocregister.com/news/grid00425cci.shtml

-- Martin Thompson (mthom1927@aol.com), April 25, 2001