State buffer on blackouts near limit

Program that lets big businesses curb energy use almost exhausted

John Wildermuth, Chronicle Staff Writer

Monday, May 14, 2001

--------------------------------------------------------------------------------

While some of California's biggest energy users cut their power last week to keep the lights on in the rest of the state, the program that provides that emergency help is almost out of business.

Most of the state's 1,600 or so "interruptible customers," who agree to short-notice power cuts in return for lower energy costs, were asked to shut down four times last week as demand for electricity rose in the hot weather and supply was constricted by planned and unplanned generator shutdowns.

But there are strict limits on how often those customers can be turned to during the year -- and the state is fast approaching those limits.

"There are only about eight more times we can call on them this year," said Stephanie McCorkle, a spokeswoman for the California Independent System Operator, which runs most of the state's power grid.

QUOTAS NEARLY FULL The situation is especially bad in Northern and Central California, where all but a handful of Pacific Gas and Electric Co.'s 170 interruptible customers have already reached their quotas for the year.

"These customers are mostly big manufacturers, food processors and companies like that," said Staci Homrig, a PG&E spokeswoman. "The ISO called on us a lot."

With the state's creaky, overworked power system poised on the knife's edge between demand and capacity, the interruptible customers often are all that keep the system from tipping over into rolling blackouts.

"They are a huge, huge help," McCorkle said.

Last Monday, for example, the ISO ordered interruptible customers to cut their loads shortly after 10 a.m. Within 30 minutes, the power crunch had started to ease, as about 900 megawatts of demand dropped out of the system. That's enough power to supply 900,000 homes.

It wasn't until late in the afternoon, when those companies reached their six-hour daily limit and were allowed to power back up, that an hourlong blackout became necessary.

Thursday, the cooperation of interruptible customers meant blackouts were never called.

DIFFICULTIES FOR CUSTOMERS The power cuts aren't easy for the businesses ordered to make them.

Hanson Permanente Cement in Pleasanton is one of the companies that already has used up its voluntary blackout hours for the year.

"In January, the outages essentially put us out of business," said Earl Bouse, who runs the company. "It put us in a situation where we couldn't make product."

The plant, which has 200 employees and operates 24 hours a day, gets only a half-hour's notice to shut down. That means the kilns have to be powered down, machinery turned off and the lights dimmed. Only a minimal amount of power remains online.

But even when the lights come back on, things don't immediately return to normal, Bouse said.

"If we're down for four hours, it's another 20 hours before we're up and running at capacity," he said.

In exchange for the headaches -- and lost business -- the cement company pays an electricity rate that is 15 to 20 percent below what PG&E normally charges. That is a major incentive for a company where power makes up about 15 percent of its total costs.

"For companies paying a $10 million electricity bill, that's a savings of $2 million a year," Homrig said.

For years, it was even a better deal. Although the interruptible power program has existed since the mid-1980s, the power was almost never interrupted. Companies signing up for the program have received $2 billion in reduced rates since 1990, but until recently they never had to turn off their lights.

From 1992 to 1999, for example, PG&E's interruptible customers were asked to cut power only 19 times. Southern California Edison, which has the bulk of the interruptible companies, had only four curtailments, all in 1998.

When the power crunch hit last year, everything changed. Both PG&E and Edison called for power interruptions 20 times, and their customers started screaming.

"It was an emergency capacity program, and no one expected we'd have so many emergencies," said Lynda Ziegler, an Edison executive.

A report by the state Public Utilities Commission in February was more specific.

"Numerous customers, including some schools and hospitals, 'gamed' Edison's tariffs," the PUC said. They figured that they could get the lower rate and never have to cut power.

When Edison ordered the power shutdowns last year, only 62 percent of their interruptible customers complied, despite signed contracts with the utility. With PG&E, the compliance level was 96 percent.

NONCOMPLIERS TO THE SOUTH Many of the Edison customers "are unwilling or unable to lower their energy use when requested," the PUC report concluded.

In 2000, Edison hit noncompliers with $92.4 million in penalties and PG&E ordered $2.2 million in fines. Millions of dollars more were assessed this year before threats of lawsuits, potential legislative action and howls from California manufacturers persuaded the PUC to order the fines suspended late in January. Much of the money probably will be returned.

Because of the controversy surrounding the interruptible program, state power officials are trying to have a new, more flexible system in place by June. The new program allows companies to cut only part of their electrical load and limits the blackouts to four hours a day and 10 days a month.

"We're trying to get (customers representing) another 400 megawatts signed up," Homrig said. "That's the same as we have for the current program."

Without the help an interruptible user program provides, California residents could be spending a lot more time in the dark this summer, ISO officials warned.

"(Interruptibles) have always been a buffer," said Jim McIntosh, the ISO's director of operations. "When I don't have that buffer, we'll move to almost instant blackouts."

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/14/MN197365.DTL

-- Martin Thompson (mthom1927@aol.com), May 14, 2001

Answers

Interuptibles are deceiving. People are snug in their belief that they are suffering little because of them. Truth is, with four used last week alone, and only about eight more available during the rest of the year, this will cease to be a buffer very soon now.

-- Wellesley (wellesley@freeport.com), May 14, 2001.