Got Juice? California May Be Saddled With
Severe Power Shortages This Summer

by Jason Leopold
April 17, 2004

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Get ready for another jolt this summer. California energy officials are expected to issue a startling report next week warning that the state is going to be terribly short of electricity, which could result in a repeat of the energy crisis that wreaked havoc on consumers and businesses in the Golden State three years ago.

Last month the National Weather Service predicted that above normal heat and dryness will blanket much of California this summer meaning that demand for power to keep air-conditioners humming will likely outstrip the state’s supply. The state is relying heavily on consumers to implement conservation measures in order to avoid issuing power emergencies and rolling blackouts.

A draft summer outlook report prepared by the California Independent System Operator, the state agency that manages supply and demand, expects demand for juice during a hot spell to peak at 44,422 megawatts, a 3.6% increase from last summer, mostly due to 195,000 new homes that were built in the state the past year and two-dozen old power plants that were permanently idled. As a result, California has 873 megawatts less than it did last summer.

The ISO report says the state will have just 1,176 megawatts to spare under normal weather conditions, but that’s assuming that all of the state’s power plants are operating, which is a rarity. The worst-case scenario, according to the ISO report, is that California could be short 1,654 megawatts meaning that a summer of unprecedented power emergencies and rolling blackouts are likely. One megawatt can light about 1,000 homes.

Exacerbating an already tough situation is major transmission line constraints. The state's high-voltage electrical highway is prone to severe bottlenecks and is in such dire need of an overhaul that soaring demand this summer could make it difficult to send power from North to South and vice versa. Moreover, the transmission line constraints hinders the state's ability to import resources from the Pacific Northwest, the ISO report says.

Californians already got a preview of what’s in store for this summer. On March 8, a volatile part of the electrical superhighway known as Path 26 overloaded due to a spike in demand and resulted in a power outage that affected about 70,000 people in Southern California. A few weeks later, on March 30th, the day the ISO finished preparing the draft report, the agency issued its first "stage 1" power alert of the year when power reserves dipped below 7%, a result of record high temperatures and a boon in air-conditioner use. Consumers, it seemed, never really learned the lessons of the 2000-2001 energy crisis: conserve or face blackouts.

But it’s not just consumers that are at fault. The fallout from the energy crisis three years ago left the state vulnerable to future electricity shortages. The crisis (and the Enron bankruptcy) destroyed the merchant power industry and made it virtually impossible for the private sector to get backers to finance the construction of new power plants to offset the supply/demand imbalance because California is too risky a place for the electricity industry to do business. That, combined with a horribly flawed market design that still hangs in limbo and to this day is still ripe for manipulation will eventually wind up leaving California in the dark if lawmakers fail to take quick action to fill the supply side gap and clean up the mess left by the energy companies that illegally exploited deregulation’s loopholes to boost their profits.

Two bills currently being debated in the state Legislature aim to solve those issues, but lawmakers can't seem to agree on either of the plans and they aren't close to reaching a resolution. Both bills contain elements of deregulation. One bill is sponsored by Southern California Edison, the Rosemead utility that helped write the state's original deregulation law that resulted in an energy nightmare; the other bill is sponsored by the private energy sector. For consumer groups, that spells deja vu.

"People have forgotten the history, and we've gone through a time warp," Matt Freedman, an attorney with San Francisco consumer group The Utility Reform Network, told the Los Angeles Times March 21. "The Legislature appears to think the energy crisis was a one-time phenomenon that can never be repeated."

Gov. Arnold Schwarzenegger said last year when he was elected following the successful recall of Gov. Gray Davis, whose ouster from office was due, in part, to his poor handling of the energy crisis, that finding a solution to the state's energy woes was one of his top priorities.

Schwarzenegger "remains focused on bringing new energy investments to California, and he's also said that California should keep a 15 percent reserve to protect against blackouts,'' the governor's spokeswoman, Ashley Snee, told the San Francisco Chronicle April 14.

But Schwarzenegger, the former Mr. Universe, doesn't have a plan in place and he has yet to lift a finger to try and design one. Schwarzenegger may think that he can rescue the state from an energy meltdown at the last minute like he does in his action movies. But by the time he acts the state will already have faded to black.

Jason Leopold is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield.

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