From the February 19, 2001 print edition

Viewpoint

Can Calif. power crisis happen here? Dick Mills

The California power crisis is making prominent headlines. Public and private pundits are making pronouncements about whether it could happen in New York.

However, public and utility officials would be fired if they failed to express confidence that everything is fine.

Unfortunately, that leaves the rest of us not knowing whom to believe.

Let's have a look at the facts.

First, the similarities: California's deregulation scheme forced utilities to sell their power plants to independents. The independents work in a free market to sell power to utilities. Ditto in New York. In California, utilities buy power from the free market, deliver it and charge consumers fixed prices based on tariffs. Ditto in New York. The Wall Street Journal called this "the Santa Claus theory of economics."

In California, costs are affected by sky-high fuel prices, especially natural gas. Ditto New York.

California hasn't built a major new power plant in 10 years. Six years for New York. California is seriously affected by the "not in my back yard" opponents to new plants. Experts say California is the most difficult state to get permission to build a power plant. They also say that New York is second most difficult.

California is dependent on imported power. California imports a little more than 20 percent of its needs. In December, New York imported 9 percent.

The simplest measure of power reliability is the generating reserve margin, the installed power generation capacity divided by peak demand. Traditionally, 25 percent was considered the minimum safe margin. In November 2000, the North American Electric Reliability Council (NERC) reported about 15 percent margin for California.

Ditto for New York.

Does all that sound ominous? Read on about the differences.

California law forbids utilities from signing long-term contracts for power futures. They can only buy power 48 hours in advance. New York utilities are allowed to sign long-term contracts to hedge against price swings, and they did so. This more than anything else is what is saving New York from volatile prices.

New York's power comes from a more diverse set of fuels than California's. Fluctuations in one fuel price, like natural gas, have less effect in New York.

California's power demand has been growing much faster than New York's.

California does not even have substantial new power plant projects in the pipeline. Even rolling blackouts failed to convince Californians to accept a new power plant in their neighborhood. NERC reports that New York is supposed to have 5,400 megawatts of new generation online by the end of 2002.

Dick Mills is a former power engineer from West Charlton, N.Y..

http://buffalo.bcentral.com/buffalo/stories/2001/02/19/editorial2.html

-- Martin Thompson (mthom1927@aol.com), February 19, 2001