http://www0.mercurycenter.com/local/center/pwr040401.htm

Posted at 10:09 p.m. PDT Tuesday, April 3, 2001

Power gap greatest in May, June

Supply-boosting efforts will take months to help

BY JOHN WOOLFOLK AND DION NISSENBAUM

Mercury News

Californians bracing for acute power shortages and rolling blackouts this summer may see the worst of the crisis as early as next month, Gov. Gray Davis acknowledged Tuesday.

Urging lawmakers to pass power conservation measures, Davis noted what many energy officials have been eyeing with growing concern: that state efforts to secure more power won't bear much fruit until late summer or fall.

Plans to obtain power contracts and portable generators for the summer are falling short. In addition, supplies from northwest dams and alternative energy generators are drying up.

``Usually the challenge is in August or September,'' Davis said. ``This year, the challenge may well be in May and June.''

Underscoring the severity of the crisis, Davis announced he has asked television stations to grant him five minutes of airtime at 6:05 p.m. Thursday to talk about energy. The last time a governor asked to address the public in a special broadcast was nine years ago when Gov. Pete Wilson talked about the state's budget problems.

The state's sense of urgency comes amid growing evidence that California's gap between power demand and available supply may be greatest in late spring and early summer.

Meanwhile, state regulators on Tuesday adopted a rash of proposals aimed at easing the pain of coming shortages and blackouts at a raucous hearing packed with protesters and others seeking exemptions.

When Davis announced a series of initiatives in February to pull California out of the crisis, he expected to have 95 percent of the state's unmet power needs secured in long-term contracts with energy suppliers.

He launched financial incentives and streamlined approval measures to bring new power supplies online by early to mid-summer, hoping to alleviate peak shortages and curb runaway power prices.

Two months later, much of that has failed to materialize. The state so far has signed contracts for just half the amount needed, and most of that power won't be available for a few years. This year, the state has signed up about a third of what is needed.

In addition, initiatives to put a host of small, portable generators in place to meet peak summer power demand are lagging. Plans by the California Independent System Operator, which runs the main transmission grid, to get 3,000 megawatts of power from these ``peaker'' plants came up with less than half that amount.

Likewise, Davis' initiative to get an additional 1,000 megawatts of peaker power online by the end of August has netted just 362 megawatts, with the first plants firing up in July. The Davis administration last month extended the deadline to the end of September, a move expected to boost the amount of peaker power to 960 megawatts.

Other major power sources coming this summer, two Calpine Corp. plants totaling 1,060 megawatts in July and 360-megawatts in August, have long been in the works. They remain on schedule, but won't do anything for May and June.

Meanwhile, supplies once counted on are evaporating. A severe drought in the Pacific Northwest has dried up the dams that are a major source of imported hydroelectric power for California.

And small alternative-energy producers that provide a third of the major utilities' power have been cutting off supply, pulling some 3,000 megawatts off the grid and contributing to blackouts last month.

The generators say they can no longer supply power because the nearly bankrupt utilities haven't paid them, and are not satisfied with efforts by the governor and regulators to fix that problem.

``You could easily see another 1,000 megawatts off-line by the end of the month,'' said Jan Smutny-Jones, executive director of the Independent Energy Producers Association.

An updated forecast from the system operator last week predicts a loss of 1,000 megawatts of hydroelectric power and the most severe shortage occurring in June rather than August. The state is expected to be short nearly 6,000 megawatts in June, a figure that will drop to 3,500 megawatts in August as new power sources come online.

``Because of new generation coming online later in the summer, it is May, June and July that are going to be the tougher months,'' said system operator spokeswoman Lorie O'Donley.

The new report did not calculate shortages for May, but shortages during that month are certainly possible. Last year's first acute power shortage was recorded May 22, prompting a Stage 2 alert that forced businesses to trim power usage.

Davis spokesman Steve Maviglio downplayed the significance of the governor's warnings about May and June. He noted that the system has proven unpredictable and that no one expected blackouts would hit in January and March.

``I wouldn't read too much into that,'' Maviglio said. ``It's just going to be tight in general, and people are just going to have to conserve, beginning now.''

To stave off a spring crisis, Davis urged Senate Democrats to pass two bills providing more than $1.1 billion to pump up programs that provide rebates and other financial incentives to conserve energy in homes and small businesses.

``The only way to fight back against the generators is to use less of their product,'' Davis said. ``The less we use, the less money they make.

``The hope is, we don't have major disruptions. We're hoping for the best and planning for the worst.''

The California Public Utilities Commission agreed to exempt all hospitals from rolling blackouts, in which utilities cut power for an hour or so from one circuit to the next to prevent total system failure.

The move came after hospitals, once considered exempt, complained of being shut off during two days of outages last month.

Commissioners also revamped a program that gives rate discounts to businesses that reduce power use on demand during shortages. They also told utilities to implement a program that gives customers a discount in exchange for having their air conditioners remotely switched off.

-- (in@energy.news), April 04, 2001

Answers

http://www.energyonline.com/news/articles/d04-1ca.asp

California Capsule: Davis Admits Power Won't Materialize

LCG, April 4, 2001—California Gov. Gray Davis conceded yesterday that he would not be able to produce his 5,000 megawatts of new electric generation by July 1. He now says that only 4,000 megawatts of new power will be on line by the end of summer.

That's 20 percent less power, 90 days late, and may still contain more than a little wishful thinking. "We're hoping for the best and preparing for the worst," Davis said.

The governor acknowledge that there may be days of rolling blackouts ahead, warning that May and June would be the most critical time for the state's stressed power supply system. "I hope we don't have major disruptions," he said.

Davis said the next two years are critical and that California could have a surplus of generating capacity in three years, when power plant currently under construction or in the late stages of the permitting process are on line.

The governor will take five minutes to explain the California energy crisis, and mostly on how he is solving it, on statewide television tomorrow at 6:05 p.m.

Other California politicians were talking like, well, California politicians. State Sen. Don Perata, an Oakland Democrat, said the governor must take bold action. What sort of bold action? Speaking of the outside forces that have caused the state's problems, he said "If, in fact, we're being taken advantage of by a school-yard bully, we need to put a roll of pennies in our fist and cold-cock the guy."

Clear thinking was evident all over California.

* When Davis made his promise to have 5,000 megawatts of new electric generation on line by July 1, he said the electricity generated by the plants would remain in California. Lawyers for the California Energy Commission say the state can't impose that requirement on developers of new power plants, even in exchange for "fast track" permitting. "We're not supposed to take protectionist action against our fellow states," said Bill Chamberlain, the commission's chief counsel. There is agreement between the Governor's Office and the Energy Commission that new plants are needed, no matter what, because the energy crunch affects the entire West.

* The California Public Utilities Commission yesterday ordered an investigation into money transfers between the state's two largest electric utilities and their parent holding companies. "This order is absolutely necessary to establish the credibility for any rate hike," said Commissioner Geoffrey Brown. "We should be assured that no assets were transferred imprudently to the parent companies and no assets in the parent companies were available" to help the cash- strapped utilities.

Greg Pruett, a spokesman for PG&E Corp., said "The commission, which is probably faced with one of the greatest challenges since the state was formed in 1850, is wasting its time reviewing old ground."

* Just when the plan by Davis to acquire 32,000 miles of transmission lines from the state's three investor-owned utilities appeared dead, it inched back into the news yesterday when state administration officials met with executives of Pacific Gas & Electric Co. and made an offer. Details of the proposed agreement were not available, nor was much enthusiasm from state lawmakers.

* U.S. DataPort, the Internet firm that wants to build a huge server farm in San Jose, has told San Jose City Council members that its facility will include a 250 megawatt power plant, the city's daily newspaper said this morning. The server farm was reported a week ago to anticipate an electric load of 180 megawatts, a stunning amount of electric demand to throw on the table during a time of scarcity.

According to the San Jose Mercury-News, the city council was of a mood to approve the server farm but not require U.S. DataPort to provide its own power. That's the same city council that voted unanimously against allowing Calpine Corp. to build a 600 megawatt baseload power plant in a rural area on the outskirts of town.

* The California Independent System Operator had not yet declared a power emergency today at 10:40 a.m., PDT, but did say in an earlier notice that is expected deficiencies in operating reserve today. The ISO also declared today a "no touch" day, meaning "don't take anything out of service to maintain it as long as it's working."

-- (in@energy.news), April 05, 2001.

http://www.sfgate.com/cgi- bin/article.cgi?file=/news/archive/2001/04/05/state2108EDT0315.DTL

Text of Gov. Gray Davis' energy speech

The Associated Press

Thursday, April 5, 2001

, , -- (04-05) 18:08 PDT Here is the text of Gov. Gray Davis' televised speech on energy Thursday, as prepared for delivery:

``Good evening. I'm speaking to you tonight from Sacramento on the most difficult issue facing California: our energy crisis.

``Simply stated, we have two problems: supply is too low and costs are too high. Both result from the flawed deregulation scheme created in 1996. But no matter how we got into this mess, you hired me to solve problems. And that's what I'm doing.

``The only long-term solution is to build more power plants. We must also cut back on consumption and stabilize the utilities. But prices won't fall and supply won't be truly reliable until we generate more power than we consume.

``Yet in the 12 years before I took office, not a single major power plant was built in California. Not one. Since I became governor, we've licensed 12 major power plants. Ten more are in the pipeline. And we're doing this without weakening our commitment to clean air and clean water.

``Deregulation required the utilities to sell off many of their power plants to independent generating companies. The generators are free to charge whatever they want because they're governed only by federal regulators who refuse to control wholesale energy prices.

``This past winter, the prices charged by the generators shot through the roof, driving the utilities to the brink of bankruptcy.

``In January, with the feds still refusing to do their job, California stepped in to purchase the power the utilities could no longer afford to buy. We didn't take over to save the utilities. We took over to keep the power on and the economy strong. That's not all:

-- We also negotiated long-term contracts for electricity at vastly lower prices.

-- I used my emergency powers to seize control of low-cost power contracts the utilities were about to forfeit to the generators.

-- We began negotiations to buy the utilities' transmission system.

-- We cut red tape and offered cash incentives to speed up construction of power plants.

-- We're launching an $800 million conservation program.

-- We're moving to establish a public power authority to build more power. If the private sector fails to build all the plants California needs, we'll build them ourselves.

-- And because I share your concern that the generators are ripping us off, we're using every legal remedy to root out and punish illegal conduct.

``We can't fix 12 years of inaction overnight. But we're making real progress.

``Now, as you know, I have fought tooth and nail against raising rates. It's become increasingly clear, however, that with rising natural gas prices, the feds' failure to control costs, and the state's lack of supply, that some rate increases are needed to keep our lights on and our economy strong.

``But I remain committed to protecting average Californians from massive rate hikes. So I'm urging the Public Utilities Commission to adopt a plan that will protect average consumers, reward those who conserve and motivate the biggest users to cut back.

``Under my proposal, more than half of you won't pay a penny more. For the rest, the average increase will be 26 1/2 percent. For many of that group, rates will rise only about 10 percent. The heaviest users will see their rates rise 34 1/2 percent on average. That includes business paying their share. This is in addition to the 9 percent surcharge we've all been paying since last winter.

``But all Californians can reduce their bills through conservation.

``Here's the point: The more you use, the more you pay. The more you conserve, the more you save. Conservation is our best short-term weapon against blackouts and price-gouging. By flexing your power, you'll help secure our energy future.

``Unlike the PUC, my plan includes funds to restore the utilities to financial stability -- if they agree to three main conditions:

``They must provide low-cost regulated power to the state for 10 years. Agree to sell us their transmission system. And dismiss their lawsuits seeking to double your electricity rates.

``My proposal raises rates fairly, assures us of long-term power, stabilizes the utilities and promotes conservation.

``Our emphasis on conservation is critical. In order to make it through the summer, we must cut demand by at least 10 percent.

``Already we've launched programs to cut back commercial lighting, and reduce consumption in office buildings, schools and government facilities.

``Friends, we have a power shortage but we are far from powerless. We are 34 million strong and if each of us does our part, we can minimize disruptions and get through the summer. We are Californians. We've withstood earthquakes, floods, fires, and droughts.

``Yes, this mess is man-made, but with your help and God's blessing, we'll get through this as well.

``Thank you and good night.''

-- (in@energy.news), April 06, 2001.