It's bad, and it'll get worse

TROUBLE AHEAD: Extra power for summer will fall well short of Gov. Davis' promise

Carolyn Said, Chronicle Staff Writer, Wednesday, May 9, 2001

©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/09/MN197841.DTL&type=news

California will get only one-third of the new power that Gov. Gray Davis promised to deliver by July 1, virtually ensuring a brutal summer of blackouts for the energy-strapped state.

Davis had pledged to take emergency measures to get 5,000 extra megawatts up and running by summer. Instead, the state will have 1,698 megawatts of the promised new power by July 1, according to the California Energy Commission. Even by Sept. 1, California will have added just 3,669 megawatts.

The goal of 5,000 megawatts -- enough to power 5 million homes -- was crucial because it represents the gap between expected supply and demand this summer.

"We're still hopeful we can get as many megawatts online this summer as possible," said Davis spokesman Roger Salazar. "But we understand there are issues involved in the siting and construction of new power plants."

In fact, experts said, there are so many obstacles that the governor's plan was unrealistic to begin with. "There are limits to what you can reasonably accomplish," said Arthur O'Donnell, editor and associate publisher of the California Energy Markets newsletter.

Without a way to plug the gap between supply and demand, California can expect a long, dark summer.

"Any warm day from May to October -- it doesn't even have to be abnormally warm -- California is going to be at risk for blackouts," said Michael Zenker, director of Cambridge Energy Research Associates, an energy and economics consulting firm based in California.

He predicts that rolling blackouts in the state this summer will be "in the hundreds of hours. I expect Californians will grow pretty weary of them pretty quickly."

The California Independent System Operator, which oversees about 85 percent of the state's straining grid, has said that anytime its load hits 40,000 megawatts or above, California will be at risk of involuntary outages. Last summer, that mark was reached on 34 days.

Whether this summer will exceed that number of days or not depends heavily on the weather. If it's a cool summer, California might squeak by with relatively low power demand and fewer blackouts. If the mercury rises, electricity use will soar as people crank up their air conditioners, and the lights will go off for tens of thousands of customers at a time.

This week's warm temperatures and concurrent rolling blackouts are a clear harbinger of a pattern expected all summer. Although power plants that were offline for maintenance aggravated the situation, the week's two blackouts "tend to indicate that the blackouts we'll have as we get further into the summer will be deeper and more sustained," said Zenker.

Exacerbating the state's inability to generate enough homegrown power is the situation in the Pacific Northwest, where drought conditions are severely curtailing hydroelectric production, meaning that California cannot count on imports this summer.

The state's next best hope for coping with the warm weather will be enticing consumers and businesses to raise their thermostats, shut off their lights and shift their heavy usage to "off-peak" hours.

"To avoid blackouts in California, we're going to need conservation," said Jim McIntosh, director of operations for the ISO.

Cutting consumption by 10 percent could get 5,000 megawatts off the grid, according to Davis. And the Energy Commission says that various measures enacted last September, such as incentives for businesses to paint their roofs white (reducing their air-conditioning needs), will save 281 megawatts by June 1 and 334 megawatts by August. The governor's latest, $800 million campaign to encourage conservation could save an additional 2,061 megawatts by summer's end.

But energy experts say Davis may be overly rosy in his projections for cuts in home consumption.

That's because the expected rate increases for electricity won't hit until June, so customers would first see a spike in their bills in July. Psychologically, many people will start serious conservation measures only once they've taken a hit in their pocketbooks.

Although Californians have already cut back enough to save 2,866 megawatts during April, "I don't think more (conservation) will happen," said Michael Shames, head of the Utility Consumers Action Network. "Markets move slowly when it comes to changing energy conservation patterns."

Davis's ambitious building plan took several routes to add up to 5,000 megawatts. In part, it relied on three huge power plants -- Los Medanos, Sutter and Sunrise -- that had already been under construction for years and are certain to come online this summer. But much of it was based on getting dozens of small energy providers to either increase output or build new facilities. Those efforts foundered on several issues:

-- QFs: Davis was counting on getting dozens of so-called "qualifying facilities" -- or QFs, basically small alternative energy generators -- to ramp up production. That, plus restarting of two existing power plants, would have added 1,244 megawatts. Instead, most QFs will produce only the bare minimum, and one of the power plants may not be restarted.

The QFs, which are paid directly by California's utilities, are still owed millions of dollars for power they produced in December and January. And a new payment scheme enacted by the California Public Utilities Commission will slash payments for power they generate in the future. QFs say they will actually lose money if they run full tilt because they can't recoup their natural-gas costs.

-- Peakers: Small, temporary power plants called peakers accounted for 2, 133 megawatts of Davis's plan. Although the Energy Commission sped up licensing for peakers, many firms were competing for scarce resources to get the mini power plants built.

"There's an internal competition (among power firms) for transmission interconnections, for natural-gas pipeline space, for turbine parts," O'Donnell said. "I felt a fairly large amount of optimism was built into (the peaker plan) to begin with."

E-mail Carolyn Said at csaid@sfchronicle.com.

Coming up short

How much more power Gov. Davis pledged to bring online by July 1: 5,000 megawatts

How much more power the state actually will have by July 1: 1,698 megawatts

How much the state will add by Sept. 1 3,669 megawatts. Projections and reality: New power in California

Gov. Gray Davis pledged to get 5,000 megawatts - the expected gap between demand and production - of new power generation online in California this summer, but only 1,698 megawatts will be ready by July 1, with 3,669 megawatts expected by Sept. 1.

Date online: July 1, 2001

Los Medanos Energy Center, Pittsburg: 559mw

Sutter Power Project, Yuba City: 500mw

SMUD McLellan upgrade: 22mw

Renewable energy projects: 80mw

LADWP Harbor- Valley: 267mw

Date online: Aug. 1, 2001

Sunrise Power Project, Derby Acres: 320mw

Restarts(x): 450mw -794mw 1,224mw 1,397 megawatts shortfall

Peaker plants: 270mw 7/01 572mw 8/01 629mw 9/01 -662mw(y) 2,133mw

(x) Restarts, rerates of existing thermal and renewables (y) Some additional megawatts may come online through small peakers being licensed by the California Independent System Operator.

-- Total new power plants (in megawatts) 3,669mw expected 5,066mw projected

Chronicle Graphic Source: California Energy Commission

©2001 San Francisco Chronicle Page A - 1

-- Swissrose (cellier3@mindspring.com), May 09, 2001

Answers

Californians Ponder Their Summer of Discontent

Businesses Will Move Elsewhere

Hyperlink: http://dailynews.yahoo.com/htx/ap/20010509/us/power_woes_28.html

Wednesday May 9 6:48 AM ET

Calif. Imposes Rolling Blackouts

By AUDREY COOPER, Associated Press Writer

Copyright, Associated Press, Fair Use for Educational and Research Purposes Only

SACRAMENTO, Calif. (AP) - As grid operators rendered some 300,000 customers powerless for a second straight day, Californians pondered their summer of discontent.

Hot weather, high demand and short supplies forced rolling blackouts from San Diego to Sacramento for about two hours Tuesday, snarling traffic and prompting dire predictions of continued power woes until the week's end.

It was the sixth day of rolling blackouts this year, and in darkened boardrooms from the Silicon Valley south, business groups considered whether industry has a long-term future in California.

``For some companies, even an hour's outage can cost them as much a $1 million if they are a technology manufacturing company,'' said Julie Puentes, executive vice president of the 500-member Orange County Business Council.

Costs to the technology-heavy San Francisco Bay area business sector will skyrocket if the blackouts continue, said Michelle Montague- Bruno, spokeswoman for the Silicon Valley Manufacturing Group.

``If we are short on energy by what all the experts say we are going to be, then the economic fallout for rolling blackouts happening every day, or every other day, it could be in the billions of dollars,'' Montague-Bruno said.

And, if large manufacturers are saddled with the 60 percent to 70 percent electricity rate hike they expect state regulators to impose in the next few weeks, businesses will move elsewhere, said Gino DiCaro, spokesman for the California Manufacturers and Technology Association.

``They will definitely leave,'' DiCaro said. ``Especially the cement manufacturers and steel fabricators. They are tied to a global market and they can't pass on their costs.''

High energy costs led some of those same industries to seek relief in the form of deregulation in 1994, a lobbying campaign that helped lead to the deregulation law passed in 1996. That law is now blamed by utilities for the state's power crisis. The largest of those utilities, Pacific Gas & Electric, declared bankruptcy in April.

The second largest, Southern California Edison, is teetering on the edge of insolvency.

On Tuesday, SoCal Edison accused Texas-based El Paso Corp. of driving up its energy costs by artificially inflating the price of natural gas by $3.7 billion over 13 months, The New York Times reported.

Edison, in a filing with the Federal Energy Regulatory Commission, said El Paso manipulated the market and curtailed the flow of gas, costing Edison alone an extra $1 billion for electricity generated by gas-fueled plants.

In response, an El Paso subsidiary said California's high gas prices came from unprecedented demand, bad public policy decisions, and an insufficient supply infrastructure rather than withholding supply.

The frustration appeared to be doled out in equal shares Tuesday among businesses, utilities and residential customers.

With inland temperatures soaring past 90 degrees Tuesday and with downtown Sacramento reaching a record of 100, many customers decided to ignore the conservation pleas from the state Independent System Operator and flicked on their air conditioners.

The supply problem - about 12,500 megawatts were not available due to power plants closed for maintenance - was expected to ease Wednesday when a 750-megawatt plant was return to service.

But at least 1,000 megawatts of power from alternative generators, such as wind, solar and cogeneration plants, were off-line Tuesday because they hadn't been paid by the state's two largest utilities since fall.

Jan Smutny-Jones, executive director of the Independent Energy Producers, doubted those plants would be able to return to service by June unless they could resolve those debts, which he says tops $1 billion.

-- Robert Riggs (rxr.999@worldnet.att.net), May 09, 2001.