Posted at 10:24 p.m. PST Tuesday, Dec. 5, 2000

Sales a dilemma in power crisis Banning supplies to other states could cause backlash, worsen shortage

BY STEVE JOHNSON

Mercury News Twenty-one times through November of this year, California came perilously close to blackouts, forcing officials to scramble for every watt they could find. But on each of those days, companies here were quietly selling enough electricity to other states to supply millions of homes, a Mercury News review has found.

Electricity was in such short supply on every one of those days that authorities declared ``stage-two'' emergencies, meaning they were on the verge of having to shut off power to various areas to keep California's entire electrical grid from collapsing.

The sale of power to other states during times of critical need here is further evidence of what many people have come to regard as the chaos that reigns over the state energy system.

And like many other problems that have cropped up since lawmakers deregulated electricity markets, dealing with it may not be easy.

Gov. Gray Davis is considering a proposal to bar California power-plant operators from selling electricity to other states during extreme shortages here, according to Davis' press secretary, Steven Maviglio.

But others fear such a prohibition could backfire, since California routinely imports about 25 percent of the power it uses. If authorities tried to restrict electricity exports, a number of authorities warned, other states could retaliate with similar restrictions on power coming to California, which could plunge the state into an even deeper energy crisis.

``There would be a huge political outcry'' in other states, said Dennis Eyre, executive director of the Western Systems Coordinating Council in Salt Lake City, an industry group that promotes electrical reliability. ``It would be viewed as California wanting to control the market. . . . I think they'd wind up in court.''

`Trade war' That view is shared by Jan Smutny-Jones, executive director of the Independent Energy Producers Association.

``I don't think it makes sense to get into a trade war with our neighbors, given the fact that we're dependent on them,'' Smutny-Jones said. ``California is not an island, and electrons need to be able to move in state, out of state and wherever.''

Still, state officials are troubled.

Not having that power available ``was a problem for us,'' said Jim Detmers, managing director of operations for the California Independent System Operator, which oversees most of the state's power grid. ``It made it very challenging over the course of the summer.''

When told of the stage-two sales, Loretta Lynch, president of the California Public Utilities Commission, said, ``That's something we need to look at on a statewide basis. . . . It does concern me.''

The Mercury News obtained the data on the transactions from the Independent System Operator.

The amount of California-produced power that was sold out of state from May 22 through Nov. 20 ranged from 2,414 megawatts on Nov. 14 to 7,282 megawatts on Aug. 11. The stage-two emergency declarations on those days meant that more than 95 percent of available power was in use. If more than 98.5 percent of available power was consumed, it would have resulted in a stage-three emergency, which probably would have prompted authorities to order rolling blackouts.

In years past, while utility firms routinely sold some of their electricity to other states, the sales only took place after California was assured it had enough power to meet its needs, according to energy specialists. But Public Utilities Commissioner Carl Wood said ``that was thrown out the window with deregulation,'' referring to the 1996 state law that deregulated electricity sales and prompted utilities to sell most of their power plants.

By opening up the electricity markets to competition and loosening the government's grip over the flow of power, lawmakers had hoped that consumers would benefit. Instead, power prices this year have shot out of sight. And while Detmers of the Independent System Operator said he lacked data on out-of-state sales in previous years, he believes the amount ``significantly went up this year.''

Moreover, despite assurance from experts that prices and reliability will improve once more power plants are built in California, officials see more trouble ahead if those new plants remain free to sell out of state.

Detmers partly blames the export of California power on the failure of the major utility firms in the state to buy more of their electricity through long-term contracts. But the main reason such exports occur is that generators can earn more doing so.

While California has a $250 cap on the wholesale price of power, other parts of the West have no such limit.

New plants in jeopardy Still, California could aggravate its problems in another way by barring generators from exporting power. That could result in many plants on the drawing boards never being built here, experts say.

``We're trying to do the best we can for consumers,'' said Richard Wheatley of Reliant Energy, a Houston firm with five California plants that sell some of their power out of state. He said his firm wants to continue providing power to California. But he was vague about what his company might do if the governor prohibits it from exporting its power.

``You just have to examine whatever they come up with and see if it's workable,'' Wheatley said. ``It's not only a Catch-22 for the state, it's a Catch-22 for us.''

http://www0.mercurycenter.com/local/center/davis1206.htm

-- Martin Thompson (mthom1927@aol.com), December 06, 2000

Answers

This is a very serious development. If the Governor pushes this thru there will be a lot of backlash from around the country. The Grid relies on this back and forth transfer of power and California is going to be in a very bad position in the future. Just my humble opinion.

-- Martin Thompson (mthom1927@aol.com), December 06, 2000.