Calif. Narrowly Averts Blackouts As Temps Soar July 2, 2001 7:53 pm EST

By Nigel Hunt LOS ANGELES (Reuters) - California narrowly managed to avoid blackouts on Monday as scorching heat threw the state back into crisis mode after news of a major new power plant and increased conservation had raised spirits earlier in the day.

The California Independent System Operator (ISO), which controls most of the state's power grid, warned early Monday afternoon that blackouts were "a possibility" but as loads began to drop the state appeared to have survived.

"We are going to be fine," said ISO spokeswoman Stephanie McCorkle.

The ISO had declared a Stage Two alert earlier in the day triggering several emergency measures including the loss of service for some commercial customers.

The alert was issued after reserves fell below 5 percent of demand. Rolling blackouts are ordered when reserves drop to within 1.5 percent to prevent a total collapse of the grid.

The ISO said the state's appetite for power was about 2,000 megawatts more than forecast, with temperatures 5 to 6 degrees (Fahrenheit) hotter than meteorologists predicted and parts of central California seeing scorching triple digit heat.

McCorkle said the state should continue to bake on Tuesday but demand should be lighter due to the "Friday effect" with loads normally lower on the day before a holiday. The U.S. celebrates Independence Day on Wednesday.

"The holiday is certainly helping us out," she said, noting demand is expected to peak at 39,231 megawatts on Tuesday, down from a peak of 40,523 MW on Monday.

Extremely hot weather across much of the southwestern United States on Monday severely limited the amount of electricity California could import from neighboring states.

California also received a blow over the weekend with outages at both 790 megawatt units at the Mohave coal-fired plant in Nevada. The plant is operated and partly owned by Edison International unit Southern California Edison and much of its power is imported into the state.

One megawatt will power about 1,000 homes.

NEW PLANT

Earlier Monday the state had celebrated the opening of a second new major power plant in less than a week, Calpine Corp.'s 540 MW natural gas-fired Sutter Energy Center in northern California.

There had also been encouraging news on conservation, with the California Energy Commission reporting that electricity use statewide dropped 12 percent in June.

Earlier this year California Gov. Gray Davis had called for consumers to try to reduce their consumption by 10 percent.

"We are building more power plants in California than ever before. Our goal is to make California energy self-sufficient. It will not happen overnight but we are making real progress," Davis, who opened the new plant, said.

The state's supplies will likely receive a further boost next week when Calpine opens a second plant, the 559-MW Los Medanos Energy Center in northern California.

California, with a power shortage linked partly to flawed state legislation that deregulated its electricity market, has already endured rolling blackouts on six days this year. The most recent outages were on May 8.

The North American Electric Reliability Council recently forecast that Californians could see as many as 260 hours of rolling blackouts this summer when demand for electricity peaks due to heavy use of power-hungry air conditioning systems.

NEW PRICE

The earlier declaration of a Stage One alert will result in an automatic recalculating of the highest price a generator can charge in the Western wholesale power market using a formula that includes fuel, operating and plant maintenance costs.

Federal regulators imposed last month a maximum price in the wholesale market recently after skyrocketing prices led the state's largest utility PG&E Corp. unit Pacific Gas & Electric to seek Chapter 11 bankruptcy protection and threatened the entire state's credit worthiness.

Prior to this latest Stage One, the maximum allowable price stood at $91.87 per megawatt hour, not including a 10 percent "credit uncertainty" premium that can be added to sales in energy-starved California.

"We are recalculating it and it may take some time before we can figure it out," Fishman said.

When the alert is lifted, the recalculated maximum price will be fixed at 85 percent of the hourly spot market price for electricity from the highest cost generating unit kept running during the emergency.

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-- Martin Thompson (mthom1927@aol.com), July 02, 2001