New power plants and conservation
efforts make a repeat of last summer's California
energy shortage unlikely, according to a report Monday
from the state's energy commission.
The report runs counter to warnings over the past
five months that the state is suffering through
an electricity crisis and was immediately disputed
by the state's power grid traffic cops.
"The sky is not falling here," said energy commission
spokeswoman Claudia Chandler.
Skyrocketing energy prices that tripled San Diegans'
electricity bills and repeated warnings of possible
blackouts throughout the state might have had more
to do with the way the newly deregulated electricity
market is working than with a shortage in electricity,
Chandler said.
"This doesn't address something that might be really
important, and that is how the market functions,"
Chandler said. "If there's a supply and demand balance
here, what went wrong? ... Why did they get so out
of kilter?"
But the report's conclusions were disputed by the
California Independent System Operator, a nonprofit
agency created by the state to oversee the electricity
grid that powers three-fourths of the state.
"We think they're probably several thousand megawatts
overly optimistic," said Cal-ISO chief operating
officer Kellan Fluckiger. "In some cases, they were
incredibly optimistic. We're the ones responsible
for actually shutting the lights off, if that happens,
so we tend to be more realistic in our assessment."
The energy commission report was one of several
significant developments Monday involving California's
electricity picture:
- The state Public Utilities Commission on Monday
issued a 4,000-page draft environmental report
on PG&E's proposal to auction 174 power-generating
dams, from Mount Shasta to Bakersfield. The draft
says that the health of California's rivers would
best be served under the status quo — the
company would hold onto the dams and the state
would continue to regulate their operations.
- PG&E withdrew a related proposal to sell its
dams to an unregulated affiliate for a previously
negotiated price of $2.8 billion, declaring that
high energy prices this summer showed those dams
were worth much more.
- And the state's deregulation architect, Sen.
Steve Peace, D-El Cajon, announced on Monday that
Senate Democrats would propose setting aside $2
billion in next year's budget for energy initiatives.
Meanwhile, Gov. Gray Davis has been meeting with
top advisers to draft an energy plan due out next
week. The plan will be Davis's proposed remedy for
the state's electricity problems.
The energy commission paints a surprisingly stable
picture for next summer. Unless California sees
extraordinarily hot weather, the state should have
enough power to meet its demand, according to the
report.
Factoring in to the energy commission's analysis
are new power plants that will generate another
1,800 megawatts, including a 500-megawatt power
plant in Pittsburg, scheduled to be completed by
next August.
And new energy conservation initiatives, including
a new state grant program, should help keep demand
down, according to the commission.
"With new resources coming online and new conservation
measures taking effect, next summer looks better
than expected, if we manage our resources properly,"
commission director Steve Larson said in a written
statement.
But Fluckiger of the ISO said the report overstated
the amount of electricity that will be available
next year by at least 3,000 megawatts, enough to
power three million houses. And, he said, that would
be the case even without deregulation.
"My largest worry about this report is that the
urgency to build new power plants will be removed,"
he said.
As for the PUC report, under the state's 1996 deregulation
law, electricity utilities were required to determine
the market value of their power-generating assets.
PG&E is seeking to meet that requirement by auctioning
its massive hydropower plumbing infrastructure,
which has been estimated to be worth as much as
$5 billion.
But the new PUC report says new, unregulated owners
would have an incentive to withhold electricity
until the price is high, and then take advantage
of those high prices by generating electricity.
Those kinds of operations could damage fish habitat
and create problems for boaters and anglers.
The report also said new owners would be likely
to develop land now owned by PG&E for homes and
increase logging and grazing in some area.
PG&E had no comment on the report.
Environmentalists were pleased with the PUC draft
report, saying it could lead to fixing the damage
that power-generating dams have created on the state's
rivers.
"It gives us a big leg up at least in not letting
things get worse," said Tom Graff, the western regional
director for Environmental Defense.
The fate of the PG&E dams also has implications
for electricity consumers.
Once the dams, canals, pipes, flumes and turbines
are sold, that money would be applied to PG&E's
money-losing investments, including its nuclear
power plant. Once those losses are recovered, a
rate freeze that protects consumers in the Bay Area
would be lifted and the up-and-down prices of electricity
will be reflected in consumers' bills.
