August 22, 2001

Summer of blackouts averted

By Tom Ramstack THE WASHINGTON TIMES

California's last blackout was May 8. That was a far cry from the 31 days of predicted blackouts and the need for a system to alert residents that their neighborhoods and businesses were about to plunge into darkness. California's predicted summer of darkness is a story of a crisis that almost occurred. A conservation program, mild temperatures and a lackluster economy that have lessened demands on the power grid appear to have saved the day. "Here we are in August and things are looking much better than anyone expected," said Gregg Fishman, spokesman for California's Independent System Operator, the state's power grid caretaker. But with another month of potentially hot weather and heavy air-conditioner use, "We're not out of the woods yet," he said. Some fancy footwork by California lawmakers also has helped. The state's Legislature has passed a law speeding site selection, licensing and construction of power plants. In the past two months, four large power plants and two smaller ones for peak electrical use have opened. Combined, they can contribute 1,600 megawatts of electricity to the state's supply. That's enough electricity for 1.6 million homes. A public-awareness campaign has showed consumers ways to conserve. Television commercials ask viewers to cut nonessential electrical use and delay tasks like laundry to off-peak times. Energy consumption in state buildings fell 22.8 percent in the first six months of the year, according to an audit released by Gov. Gray Davis. It credited a conservation program that included training for state employees and making buildings more energy-efficient. The state's energy reserves have remained above 7 percent since early July. If the reserves drop below 1.5 percent, the independent system operator issues a Stage 3 electricity alert. The last time that happened was the afternoon of May 8, when electricity customers statewide experienced rolling blackouts. A lingering question, however, is whether the crisis is over or merely postponed. "The pieces are in place to solve this problem, but whether they will all actually happen remains to be seen," Mr. Fishman said. Roger Salazar, Mr. Davis' spokesman, also remains cautious. "I would argue that we still have a lot of work to do," he said. "We've been able to make it through the summer fairly well so far. We're still in a situation where we have a dysfunctional energy market." California's aging power grid suffers from transmission bottlenecks. Most of the reserves are in the southern part of the state. When Northern California runs low, the south must send electrical energy through a transmission choke point that loses some of the current in the process. Another suspected problem involves the generating companies that sell electricity to the state. "We definitely suspect that some of these generators were profiteering," Mr. Salazar said. "Because of our demand, the generators could charge anything they wanted." The California attorney general is investigating the profiteering accusations. The state is seeking refunds totaling $8.9 billion from in-state and out-of-state generators and municipal utilities it accuses of price-gouging. The state's claims are pending before the Federal Energy Regulatory Commission, the agency that regulates utilities. "We had a specific strategy to drive down energy prices, and it was successful," said Sandy Harrison, California Finance Department spokesman. In fact, some of the states that provided a lifeblood of electricity to California during desperate times last spring have since become its customers. "There are a number of days there is excessive energy and it is being sold off," Mr. Harrison said. State lawmakers are considering changes to their 1996 deregulation law, which forbids utilities from passing on costs to consumers and has contributed largely to the crisis. The law helped drive Pacific Gas & Electric Co. into bankruptcy and Southern California Edison to the brink of it. The two utilities, which provide most of California's power, lost a combined $12 billion to rising wholesale electricity costs. The state began buying power during the winter on behalf of the utilities and, in March, the state Public Utilities Commission approved record rate increases of up to 46 percent for power users. In May, the California Legislature authorized the state treasurer to issue 10-year revenue bonds to pay the utilities' debts. "The bond hasn't been issued yet, but it's a work in progress," Mr. Harrison said. To reduce costs, the state now buys wholesale electricity at low rates under long-term contracts, then sells it to consumers using the utilities' transmission and billing systems. The long-term contracts help the state avoid high prices in spot markets. Also, the Federal Energy Regulatory Commission in June imposed bid caps on the price that Western generators can charge for electricity. The federal government is considering more comprehensive solutions. President Bush has ordered his Cabinet to develop a long-term national energy policy to avoid future problems like California's energy crunch. Congress is considering an energy bill that would open as many as 1,900 new electrical power plants, create incentives for conservation and new technologies and allow oil drilling in the Arctic National Wildlife Refuge. But the congressional debate lacks the urgency of the spring, when California's energy problems threatened to become the nation's economic headache. California contributes $1 of every $5 to the national budget.

-- Anonymous, August 22, 2001