Posted at 10:00 p.m. PST Monday, Nov. 20, 2000

State contradicts power concerns There will be enough energy for summer, commission says BY JOHN WOOLFOLK Mercury News

Contradicting months of dire warnings from energy suppliers, state officials Monday said California should have enough electricity to meet next summer's demands.

While stressing that new power plants still will be needed in the near future, California Energy Commission officials said the threat of blackouts and severe cutbacks next summer now seem unlikely.

``With new resources coming online and new conservation measures taking effect, next summer looks better than expected if we manage our resources properly,'' said energy commission Executive Director Steve Larson.

The commission's surprising report was greeted with skepticism by power companies, utilities and officials who oversee the state's power grid. They worried that the report's findings would hamper efforts to build badly needed new power plants and transmission lines.

``I would characterize their report as very, very, very, very optimistic,'' said Kellan Fluckiger, chief operating officer of the California Independent System Operator, the agency that oversees most of the state's high-voltage transmission system. ``I hope this report doesn't detract one iota from the urgency for supply generation and transmission capacity additions.''

System operator criticizes report

Just this month, the system operator warned that California could be short next summer as much as 8,000 megawatts -- enough to supply power to 8 million homes at a time -- and predicted a 50 percent chance of blackouts.

The supply crisis arose as a result of the state's 4-year-old landmark effort to deregulate its energy market. Since it was approved, power supplies have not kept pace with demand.

Last summer, the state faced a record number of critical power shortages, and rolling blackouts struck the Bay Area in June. The scarcity tripled energy bills in San Diego, the first area to pay market prices, and sent state lawmakers scrambling for solutions.

On Monday, as the commission released its findings, state Democrats aired a proposal to put $2 billion of an expected $10 billion budget surplus toward efforts to lessen California's electricity shortage.

Sen. Steve Peace, D-La Mesa, architect of California's law to deregulate its electricity industry, said the money would be put in a special reserve fund for ``energy initiatives.'' Those could include building state-owned power plants, helping utilities finance regulated power plants or taking over the transmission system, he said.

The commission report comes a week before San Jose will consider approval of Calpine Corp.'s controversial plan to build a 600-megawatt power plant in Coyote Valley.

Critics said the report bolsters their claim that the proposed Metcalf Energy Center isn't as essential as Calpine would like many to believe.

``The need is not there,'' said Calpine critic Issa Ajlouny. ``We have enough power. It was never so much a need for power as to scare people to get power plants in neighborhoods.''

But the commission's Larson said the new outlook for next summer doesn't lessen the need for more power plants.

``This shows we are making some progress,'' Larson said. ``It doesn't, on the other hand, say, `forget it.' We do still need to aggressively attack the problem of finding more supply and more efficiencies.''

Calpine spokeswoman Katherine Potter said the company isn't worried about the commission report affecting the Metcalf plant's approval. The plant, expected to be online in a couple of years, wasn't intended to meet next summer's needs, she said.

But Potter echoed the system operator's doubts about the projection's accuracy. A spokesman for Pacific Gas & Electric Co. also was skeptical about next summer's energy supply.

``There are assumptions there that if valid, would work to everyone's advantage,'' said PG&E spokesman John Nelson. ``But as we've seen with the marketplace, old assumptions don't necessarily apply.''

Commission defends projections

Larson said the commission's projections stem from its first detailed examination of the state's energy supplies and needs since California moved to deregulate its electric industry in 1996. The energy commission oversaw power needs before deregulation, but now that job is handled by the system operator. The commission's analysis was ordered by new legislation this fall aimed at solving the state's power needs.

``This is the first really thorough analysis from the bottom up since the crisis began,'' Larson said. ``I'm very confident of what we're saying here.''

The commission projects a supply of 52,500 megawatts next summer. It expects a peak demand of 47,226 megawatts, under normal weather conditions.

If temperatures are extremely hot, demand would rise to 50,068 megawatts while supplies would be 52,190 megawatts.

Blackouts are triggered when supplies fall below 3 percent.

The commission's projections are based on an expectation of between 1,888 megawatts and 3,087 megawatts of new power generation available for at least part of the summer. The additional supply would come from a couple of new large power plants outside the Bay Area and from a few smaller, portable generators.

The commission also expects a new $50 million conservation initiative should reduce demand by 220 megawatts. The program, approved this fall, includes reflective paint on building rooftops and low-watt lights in traffic signals.

Fluckiger said the commission's report fails to account for power plant breakdowns, delays in getting new supplies online, and imports that may not materialize.

http://www0.mercurycenter.com/local/center/energy1121.htm

-- Martin Thompson (mthom1927@aol.com), November 21, 2000