State winning this time in power game;

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New power plants, conservation get credit for reaching record July demands

The Desert Sun (Palm Springs, CA)

SACRAMENTO – Californians are using record levels of electricity this summer with no fear of rolling blackouts – thanks to conservation and an 8,509-megawatt effort by utilities.

The state’s electric power system isn’t showing any of the strain that plagued California during the energy crisis of 2000-01, despite continued population growth and a pick-up in the economy.

In those years, a much-heralded reordering of the rules of operating and delivering power spectacularly crashed, resulting in seven days of blackouts, extreme measures and national headlines.

But last month, on July 19, the 5-year-old state power use record set in 1999 at 43,609 megawatts of power was broken with a demand for 44,042 megawatts. July 20 went higher with 44,330 megawatts – and July 21, still higher, with 44,360 megawatts.

These record power demands, which were reached without triple-digit temperatures in most of the state, largely are attributed to economic growth and were reached without any crisis.

“We rolled the dice and won this time. We came out without any damage,” said Gary Ackerman, executive director of the Western Power Trading Forum, an industry trade group involved in advocating a set of new rules for energy generation growth.

Energy experts attribute the ample power availability to construction of new power plants and efficiency/conservation efforts that have built up the state’s energy reserve.

New plants, power online

There are several factors involved in putting more juice in the system:

Twenty-five new power plants have added 8,509 megawatts of power since 2000.

A megawatt is enough power to serve 750 homes – so the new plants have the capacity to power the equivalent of 6,381,750 homes.

Eight new plants are under construction, adding another 4,901 megawatts, and six more are in the approval process at the Energy Commission at 1,691 megawatts.

Conservation, which peaked at 8.5 percent in the energy crisis, continues at an undetermined lower rate – and the state has created a new “Flex Your Power Now” campaign for hot days to keep it going.

But the experts remind Californians that the summer isn’t over.

“The big question is: What happens if we hit a heat wave in Northern and Southern California?” said Stephanie McCorkle, spokeswoman for the California Independent System Operator, which manages the state’s transmission system.

As for the long run, there is general consensus that the state will need more power plants, but there are differences over the urgency and the right rules to build those plants. There also is as great a need for new transmission lines, experts said.

“This summer we could see as much as 1,600 megawatts of electricity stranded at Southern California power plants because we don’t have adequate transmission lines,” McCorkle said.

Still no system solution

Because of the severity of the 2000-01 blackouts, energy is still a sensitive issue in California.

And it’s big money. State wholesale power costs, apparently manipulated by energy traders, went up from $7.4 billion in 1999 to $27 billion in 2000 and 2001 each, according to state records.

Yet three years later, state officials still are unable to agree on how to put a workable power system together.

“It’s still a very emotional topic unfortunately,” said Frank Wolak, a Stanford University economist and chairman of the ISO market surveillance committee.

The impact of the blackouts reverberated nationwide as many states were in various stages of adopting their own versions of deregulation.

“The California rolling blackouts and power crisis put the brakes on other retail statewide deregulation,” said Alexander Flueck, associate dean of the Illinois Institute of Technology.

So far this summer, California’s three major utilities – Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric – collectively have set new records in meeting peak demand for power.

Growth of power demand

The ISO said growth in demand is reaching 6 percent over last year.

But that’s a raw number that hasn’t been adjusted for temperature variations, said Claudia Chandler, spokeswoman for the state Energy Commission, which approves power plants and tracks state energy data.

She said the commission originally estimated demand would grow 2.6 percent in 2004 but revised that figure up to 3.5 percent in July.

“We attribute the increase to economic recovery,” Chandler said.

The state’s population also is growing at a rate of more than 500,000 people a year, both Chandler and McCorkle noted.

Thanks to new energy-saving building standards, the state also is saving 500 megawatts annually, plus an additional 290 megawatts cumulatively, each year since 2002, from more efficient appliances and lighting, Chandler said.

New standards for buildings and appliances will be taking effect in the next year or so, with predicted additional savings of 380 megawatts.

Such savings are the equivalent of a couple of power plants, which average 350 megawatts to 500 megawatts, Chandler said.

“If there was a silver lining in the 2000-2001 crisis, it was that it educated people to the value of energy efficiency, not just conservation,” she added.

Looking at the big picture, the Energy Commission calculates that the state this month will have a total power supply of 60,157 megawatts, when public and private utilities are included.

If the weather is normal, the state will need only 53,896 megawatts, giving it operating reserves of 13 percent. But if this is an unusually hot month, then the demand would go to 57,247 megawatts, leaving about a 6 percent reserve.

The ISO and Public Utilities Commission are at odds over whether the available reserve should be 15 percent that PUC suggests or 17 percent as ISO wants, McCorkle said.

The ISO begins declaring emergencies calling for voluntary cutbacks at 7 percent and involuntary interruptions may kick in at 1.5 percent.

In the long term

Looking into the future, the Energy Commission projects that reserves with normal August weather will fall to 8.6 percent by 2010 and to 1.9 percent in extremely hot summers.

The forecast does call for better margins of up to 8.7 percent in the hottest weather with accelerated programs to increase generation and reduce demand.

But there are a lot of variables in the campaign for energy security.

For example, 20 percent of the state’s power is imported, and part of that depends on water conditions in the Pacific Northwest, which is a little dry this year.

Hydropower, which is used especially to meet peak demand, also is important in-state. The state started the year with good snowpack, but a warm spring led to early melt, and California could run a little thin if there’s an unusually warm fall.

More broadly, while construction is under way on some new plants, it is on hold for others. Nine projects with 6,158 megawatts are on hold and three plants, with 342 megawatts, have been canceled as of June 30.

Business leaders, especially in the power industry, blame regulatory uncertainty and the lack of a clear energy policy for construction delays.

As recently as Friday the San Francisco Bay Area Economic Forum, a nonprofit group of business, labor and academic leaders, issued a report saying the state is underestimating future demand and increasing the risk of a power shortages as early as 2006.

“Now is the time for clear direction and action if we don’t want to see any more rolling blackouts,” Lenny Mendonca, a director at McKinsey & Company, an international management-consulting firm that helped develop the report, said in a prepared statement.

But there is disagreement over the fundamental issue of whether to try a new, improved deregulation or return to a better version of the old regulated system.

Details are many and complex, and some analysts questioned the urgency and argued that it’s more important to take time to do the job right to avoid repeating the last debacle.

“The energy industry always wants us to think that we’re on the edge of another blackout, but we’re really not even close,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights, a nonprofit advocacy group.

He wants to re-regulate the electric system, with better control of utilities that he said got fat off the old system.

Wolak recalled that blackouts in the crisis didn’t occur on hot days, but instead took place during cooler months.

“It had nothing to do with a shortage of (generating) capacity,” Wolak said. “It had more to do with a shortage of competition and a shortage of regulation from (the Federal Energy Regulatory Commission).”

He argued for rules that allow utilities to contract for their future power needs in a way that encourages generators to build sufficient plants and Wall Street to invest in them, and joined researcher James Bushnell in a call for more transmission lines.

Bushnell proposes a transmission system that allows for what he calls “locational pricing” so prices are attuned to the needs at thousands of locations and thus responsive to market conditions.

“The main problem is getting the supply in the right place,” said Bushnell, who works at the University of California, Berkeley, Energy Institute.

And Severin Bornstein, who heads that institute, also urged regulators not to forget the demand side and what can be gained by giving power users, especially large ones, the ability through sophisticated meters to adjust usage by time of day and price.

“In all of the discussion on how we need to have a lot of (supply) reserves, the need for demand to play a significant role is getting lost,” Bornstein said.

Glance: How to stay cool and conserve

Go to Southern California Edison‘s Web site, for information on:

Rebates for qualifying energy-efficient products, such as programmable thermostats, pool pumps and ducted evaporative coolers.

Keeping thermostats set to 78 degrees, a simple way to stay cool and keep energy costs down.

For more information on SCE’s programs and services call (800) 655-4555.

Source: Southern California Edison

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