The San Diego Union-Tribune
Ah, the glorious change of seasons in the deregulated electricity business. Supplies are tight, the lights flicker, and electricity costs go through the roof.
Sounds familiar? Sounds just like the winter — and the past 11 months?
Well, power experts say, this is what the coming summer holds in store as well. Whether demand is high or low, the deregulated electricity market seems unable to deliver sufficient power.
Yesterday, more than 12,000 megawatts of electric generating capacity was out of service — or nearly 27 percent of the state’s total — because of breakdowns or planned maintenance. The level was remarkable, even to an industry veteran.
“I’ve never seen 12,000 megawatts out in California, and I’ve been doing this for 29 years,” said Jim McIntosh, director of grid operations for the California Independent System Operator, the agency in charge of electricity reliability for most of the state.
Actually, McIntosh forgot last December, when some 15,000 megawatts — 30 percent of generating capacity — was idled. This in an industry that nationwide averages just 10 percent in capacity outages.
McIntosh said yesterday that the state was prepared to deal with losing 7,000 megawatts of capacity because of scheduled maintenance and upgrades. But the ISO was caught short by the loss of more than 5,600 megawatts due to breakdowns.
Industry sources say the shutdowns have been caused by growing demands on an aging fleet of plants. But not all accept that reasoning.
The Foundation for Taxpayer and Consumer Rights perceives a different pattern in recent months. Whenever big money issues for the industry are on the table — a $13 billion bond for power purchases and a windfall profits tax were the hot issues in the Legislature this week — the lights seem to flicker, said Doug Heller of the Santa Monica-based group.
“The energy companies want to know that Gov. Davis has billions to pay for energy,” Heller said. And he rejects the notion that the state fleet of plants has aged so quickly.
“Not that much has changed from recent years,” Heller said.
Generating companies disagree and argue that their plants are cranking out more power to pick up the slack from the loss of hydroelectric power.
Two of the state’s largest generators — Duke Energy and AES — said their ongoing shutdowns were for scheduled maintenance.
Tom Williams, a spokesman for Duke, which owns the South Bay Power Plant in Chula Vista, added that the company’s plants produced more power last year than they did in 1994, a dry year when shortages of hydroelectric power put extra demands on plants that burn fossil fuel.
Similarly, Aaron Thomas, a spokesman for AES Pacific, which owns 4,000 megawatts of generating capacity in California, said some of its ongoing maintenance was originally scheduled for the winter but was postponed at the request of the ISO because supplies were short then.
Whatever the reasons, since December California has regularly had 25 percent or more of its electricity generating capacity off-line. At times, the rate has reached 30 percent.
The industry’s national reliability council says the average is about 10 percent.
Electricity prices, meanwhile, have spiked in recent days to $350 to $500 per megawatt-hour, up from about $250, one trader said. A megawatt is sufficient to power about 750 homes.
A $500 per megawatt-hour price translates to a retail cost of 50 cents per kilowatt-hour, or more than 10 times what power cost consumers one year ago.
This summer could be much worse.
For one thing, peak demand yesterday was about 34,000 megawatts, far below the 45,000 megawatts or more expected this summer. The trader noted that temperatures outside the state continue to be moderate. A full regional heat wave will drive state costs even higher.
“This is only a California heat wave,” said the trader, whose company’s policy prevents him from being quoted by name. And he added, “California has not yet bought anywhere near their full load.”
How high? The trader guessed the state has paid as much as $850 per megawatt-hour for last-minute purchases in recent days.
Michael Shames, executive director of the Utility Consumers’ Action Network, said the warmer weather actually takes some pressure off generating companies.
“The generators don’t have to go out of their way to create scarcity now,” Shames said. “Supplies are tight.”