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Most of West in the Same Power Jam as California Utilities: Other states ran their grids at fever pitches as populations swelled and few new energy sources were developed. Now, also facing blackouts, they want to tilt balance of power away from the Golden State and toward themselves.
By PETER G. GOSSELIN, Times Staff Writer
WINTERSBURG, Ariz.--For more than a century, California ran a simple account with the rest of the West: It demanded and the West supplied, most especially water and power.
But as the Western states have ballooned in the last decade--in no small part because of an outbound trek of Californians--this simple, supply-demand relationship has broken down. Fundamentally, the rest of the West has outgrown its electrical system just as California has its own. And it has done so in very much the same way--by adding too many people without enough new power or conservation.
Indeed, statistics show that much of the rest of the West would have been on the verge of trouble even without California's help and may yet face the sort of rolling blackouts that have wreaked so much havoc in the Golden State.
The booming Southwest has run its power grid at such a fever pitch that its planning reserves--the extra power that utilities build in to handle emergencies--have shrunk to levels that many regulators and industry experts consider dangerous.
Almost none of the West save Montana has increased its power production at anything like the pace of its population growth during the last decade. Despite the long economic boom of the 1990s, which smiled especially on the West, several, such as Arizona, have failed to complete a single new power plant. "We don't know how bad it's going to be yet," said Utah's Republican governor, Mike Leavitt. "We won't know that until May, June, July and August, when everyone in the Southwest turns on their swamp coolers." In trying to dodge the blackout bullet, many Western leaders are seeking to force a great change on the region: to renegotiate their states' basic deal with California. They want to end an old relationship--that between center and hinterland, colonizer and colonized--and establish a new one that could curtail California's long regional dominance.
In the strange chemistry of the moment--when a once-Republican state government has turned Democratic and a once-Democratic national government has turned Republican, when the battle is to a large extent over privately owned electricity rather than publicly controlled water--they could actually meet with some success. "California spent the 20th century decolonizing itself from Wall Street and the East," said Kevin Starr, the state librarian and author of a multivolume history of California. "Now, all of a sudden, there's a dramatic possibility of it being recolonized, at least in part, by the rest of the West."
Captive Plants Feed Power to California Ground zero for these changes lies 50 miles west of Phoenix in the dry scrublands of Wintersburg. This is home to the Palo Verde nuclear facility, now the nation's single biggest power producer. It will soon be home as well to between three and six new gas-fired power plants that, combined, will produce even more electricity than their giant neighbor.
Palo Verde represents a great deal about the old, fraying world of regulated utilities and about the supply-demand relationships that California once maintained with the rest of the West. More than one-quarter of the plant is owned by Los Angeles' municipal utility, the Department of Water and Power, several other California cities and Southern California Edison. A row of steel latticework towers runs off toward California, carrying a transmission line from plant to consumer. California has big stakes in a half-dozen similarly captive plants in an arc of states from Nevada to New Mexico.
From California's point of view, the beauty of these projects has been that they provided near-certain power without the muss of meeting state pollution standards or the political hassle of building closer to home. And at least until the mid-1990s, California regulators virtually guaranteed that their owners covered their costs and made profits, even if plants' power wasn't immediately needed. "The first principle of the old system was that you had to be able to meet demand, no matter what," said Paul L. Joskow, a veteran utility economist at the Massachusetts Institute of Technology. "If you had too much power, if it cost you a little too much, that was less important than being sure you could meet demand." And, he added, "you had regulators watching to make sure you did." The gas-fired plants that are about to pop up in Wintersburg are also representative, but of the new, deregulated world of power production. Although they will crowd in around Palo Verde and tap into the same California transmission line, they are being built on an entirely different business premise: selling power to the highest bidder.
In fact, the reason this empty patch of desert has become such an electricity hot spot lately is not Palo Verde itself, but its huge transmission lines. In addition to the California line, four others fan out from the plant: two back to Phoenix, one east to New Mexico, and one north to Utah and from there to the Northwest.
All were built to hard-wire the nuclear project to its owners. But they are now seen as the means by which a new breed of producer can get top dollar by sending power wherever prices are highest. "It used to be generating capacity was built by people who looked at the market to see if they could meet demand," said Jack Davis, president of Pinnacle West Capital Corp., which owns Arizona's major utility and is putting up two of the Wintersburg plants. "Now," he said approvingly, "it's being built by people who look at the market to see if you can make a lot of money."
Plans Go Awry in Many States Money, not the watchful eye of government, was what was supposed to assure that electricity deregulation worked. The opportunity to make it would cause investors to flock to the electricity business, ensuring that plenty of new power plants got built.
If too many went up, it would be investors, not ratepayers, who suffered. If too few, then high prices would attract still more investors, more plants and, ultimately, more power. But to date, almost nothing about deregulation has gone as planned--and not just in California, but in the West in general. Take Arizona. The state has a hands-off attitude toward business, including its utilities. It has almost none of the environmental restrictions blamed for keeping California from putting up the new plants it needs.
Its population grew by 40% from 1990 to 2000, according to the Census Bureau. And its demand for electricity expanded at nearly twice that rate, according to industry figures. "Arizona should have been a power producer's heaven," said A. Michael Schaal, a senior analyst with Energy Ventures Analysis Inc., a prominent Washington-area consulting firm.
But Arizona's power production rose a mere 4% during the 1990s, mostly as a result of improving existing plants. Until 18 months ago, no one had applied to build a major power plant since Palo Verde in the late 1980s.
"I guess I go on the assumption that the utilities plan with some sort of 10-, 20-, 30-year time horizon," Arizona's Republican Gov. Jane Dee Hull said in a recent interview. "I think what we all worry about is: Are they planning?" Or Nevada. Its utilities apparently did plan and increased electricity-making capacity between 1990 and 2000 by a substantial 44%. But that wasn't enough to keep up with the state's population, which increased 66%. On Thursday, Nevada Gov. Kenny Guinn, a Republican and former energy company executive, indefinitely halted deregulation in his state.
Or traditionally energy-rich Washington state. One of its major utilities, Seattle City Light, recently learned that all of its previously planned supply increase for the next four years will be consumed, and then some, by just three new customers: computer server farms being built to handle the growing Internet traffic in and out of the high-tech capital.
But it's unlikely to be able to get extra power soon because regional supplies are balanced on a "razor's edge," according to Northwest Power Pool President Jerry Rust. "We have no cushion." Indeed, the electricity supplies of the entire West are balanced on a razor's edge, with a variety of forecasters predicting serious shortages this summer.
Schaal, the Washington-area consultant, for example, said the region will come up 6% short. "Westerners can expect 150 to 275 hours of rolling blackouts, most of them in California," he said. One of the most striking aspects of the current situation is that, in contrast to what most people think, supplies have not grown short just recently. They have been perilously tight for the last several years--before the start of California's troubles of this summer and fall, and before the near-record dry winter that has left the Northwest dangerously short of water for its hydroelectric dams. The implication is that California did not cause other states to run short of power so much as trigger events that exposed their danger. It did that, according to key observers, with one monumentally inept maneuver.
When California required its major utilities to buy power in the volatile spot market and simultaneously prohibited them from passing along higher costs to consumers, it set off a furious price spiral. That effectively stripped the entire region of its energy security blanket, the assurance that it could buy extra power relatively inexpensively if local supplies proved inadequate. The result has been a string of crises across the West.
In southern Arizona, for example, the San Carlos Irrigation Project, a tiny public utility that tried to jump into the deregulation vanguard by dropping long-term contracts in hopes of more power at lower prices in the spot market, has announced that its bills are going up 300%. Most of the project's 13,300 poor customers say they can't pay.
In Phoenix, utility executives who had confidently said the state was rich with new power projects about to come on line have decided to pull two 50-year-old steam plants out of mothballs and rent a pair of portable generators to reduce purchases from the expensive spot market. In Idaho, the big power company is appealing to potato farmers to skip planting and sell the electricity they would use running irrigation pumps back to the firm. Company executives figure the buyback will be cheaper than purchasing power on the open market--and the potato farmers are likely to do pretty well themselves.
Deep Hostility in Rest of the West The subtle difference between California's triggering recent events and actually causing the region's crisis is largely lost in the current atmosphere of apprehension and upheaval. Although leaders of the rest of the West are scrupulously evenhanded in commenting to outsiders about their big neighbor, they are less guarded at home.
The normally mild-mannered Leavitt, for example, was recently quoted as warning a Salt Lake City audience that "California, if given the chance, would put a shunt into our veins and bleed us pretty quickly." (In an interview, he denied having made the remark.) Such comments reflect an old and easily rekindled view among Westerners that their states are, in the words of historian Bernard DeVoto, "plundered provinces"--terrain that first Easterners and then Californians have regularly raided for minerals, water and, most recently, power.
But this time, some Western leaders think they can change all this. "A lot of people see an opportunity to rewrite the fundamental relationship with California to their advantage," said Stanford historian Richard White. The attempts at rewriting are taking shape across the West. In the Northwest, Oregon, Washington, Idaho and Montana are redoubling their efforts to take over the Bonneville Power Administration, the huge, federally controlled generating system on the Columbia and Snake rivers that is one of California's chief sources of summer electricity. "The crisis has highlighted the danger that power generated in the region can be exported without the region's consent," Oregon Gov. John Kitzhaber said in an interview. In Arizona, state officials have gone from having no proposals for new power plants to being buried by them. Regulators recently approved the construction of 10 plants, including several around Palo Verde, and are considering another eight.
Although they are requiring the plants to temporarily serve Arizona's needs first, the facilities will soon be able to sell their power for whatever prices they can command, an arrangement that could leave California just one among many bidders. (Federal officials are unlikely to get in the way: Gov. Hull is close to President Bush, who in turn has shown little interest in helping Democratic California.) Perhaps the most aggressive efforts at change are occurring in Utah, where Leavitt is trying something that could become California's worst nightmare--recalling power that Utah produces for the state.
Los Angeles' DWP and several other California utilities own three-quarters of the huge, coal-fired Intermountain Power Project in west-central Utah, and have been drawing on it without incident for 15 years. But Utah officials recently unearthed a long-forgotten provision in their agreement with the plant's owners that gives them the right, with proper notice, to recall power for local use.
The state has already notified Los Angeles that it is taking back 50 megawatts of electricity capacity this summer and another 170 next summer, and it may be able to take back still more, according to plant general manager Reed Searle. Although the amounts are trivial--the Los Angeles utility either owns or has firm contracts for more than 7,000 megawatts of capacity--Leavitt said Utah will demand similar recall provisions in agreements for any new plants in the state, including a 500- to 750-megawatt facility that Los Angeles is negotiating to build.
"California has chosen not to create its own power generation and has depended on us to do that," the Utah governor said. "That's fine and we're willing to do that. "But," he added, "there comes a point at which, if demand grows too large, we've got to hold some of this capacity back for ourselves, and for our children and grandchildren." If Utah and the rest of the West have reached that point, California could be in for a much bigger and more enduring shock than the one from which it now suffers.
--- Times researcher Lynn Marshall in Seattle contributed to this report
-- Martin Thompson (email@example.com), February 26, 2001
The 25% surplus was plenty to cover any
increase in the population. The problem
is not that there weren't enough power
plants being built, but what happened to
the surplus. The focus should be on how to
reduce the outages, not trying to build
new plants that won't be online soon enough.
Power Jam? maybe chunky marmalade ::::-§
-- spider (firstname.lastname@example.org), February 26, 2001.