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California, West Eyeing Early Spring Assessment for Summer Peaks

While most of the independent power sector and California state officials will be holding their collective breath until the end of the upcoming summer, for the short term western electric industry stakeholders are focused on early April for the final assessment of what likely will happen and how much extra demand-side management will be needed to avoid blackouts, particularly in the southern half of California.

In the Pacific Northwest, the good news is that it looks like the region will have adequate power supplies, but the costs will be higher because water levels are only about 75% of normal. In California, since last fall the state's grid operator has warned of potential troubles if there is unusually hot weather and/or a large number of major power plant outages in the south.

However, at least one state official, the top regulator, Michael Peevey, president of the California Public Utilities Commission, thinks blackouts will be avoided because of the collaborative work underway to put every possible mitigation measure in place.

At the governor's specific request, California's Business, Transportation and Housing Authority Secretary, Sunne McPeak, has had a task force working on the summer '05 power supply issue since last September with senior staff from the CPUC, California Energy Commission and the California Independent System Operator (CAISO), devising plans and programs to make sure the state doesn't have any shortages, Peevey said.

"So there is definitely a threat, but I think we have moved very significantly to head that off," said Peevey, who noted that if the state can avoid any major problems this summer, he thinks there will be added generation and transmission coming online for the 2006-08 period to assure relatively smooth sailing.

Independent generators are gearing up to take extra planning and training measures to avoid unplanned maintenance of their plants this summer, knowing that if major blackouts did occur, they most likely would eliminate any chances of the state embracing more direct access and stepped up merchant generation development.

Near the end of this month and into early April, key forecast updates will be coming from the CAISO and the California Energy Commission (CEC), and so far they haven't been in complete harmony. Nevertheless, everyone has agreed that blackouts might result in Southern California from a long streak of unusually hot weather throughout the West causing a "coincidental peak," something Peevey stresses is a "one-in-ten-year" event. That scenario would have all of the major load centers in the West essentially having record peak-demand simultaneously.

The Northwest River Forecast Center has been changing its forecasts almost hourly, one Pacific Northwest energy stakeholder said. Its latest measurement at the Dalles Dam at the mid-Columbia River between the states of Washington and Oregon predicts a runoff of 71.2 million acre-feet of water, or about 67% of normal, but the forecast assumes normal precipitation levels going forward..

"If we get 75% of normal precipitation from now through the end of August -- the usual planning period with water -- the potential runoff drops to 65.5 million acre-feet, which is less than 67% of normal, but it is still quite a bit higher than the two worst cases on record," said John Harrison, spokesperson for the Northwest Power Planning and Conservation Council. In the 2001 drought, the second worst on record, the runoff was 58 million acre-feet, he said, and in 1977, the worst year ever recorded, it was 54 million acre-feet.

"So we haven't hit the bottom yet, and the forecast will keep getting revised every two weeks. The other thing that is important here is that we have a 1,500 MW surplus, based on our critical water calculations, compared to 2001 when there was a 4,000 MW deficit."

That is the "good news," Harrison said, but the surplus comes from the region's addition of thermal electric generating plants, whose output costs more, so customers -- particularly the large federal regional wholesaler/transporter, Bonneville Power Administration (BPA) -- will have to pay more. "That is a whole different situation than what we had in 2001," he said.

Officials at the CAISO and CEC, while beating the drum for attention toward this summer, are not sounding any alarms yet. And when they do, it won't be caused by a worsening hydro-electric situation in the Northwest. It will be weather and infrastructure-focused, concentrating on Southern California.

With a still-new governor's administration, a brand new CEO and board at CAISO, and an already action-driven generator and utility group, it is likely that voluntary curtailments -- particularly in the governmental sector -- will be relied upon before a Stage 3 alert and rolling blackout is ordered by the CAISO.

Last month at a meeting of the Western Power Trading Forum a number generators and officials in the Independent Energy Producers' Association reiterated that the nonutility power sector is ready to begin re-investing in California, but summer blackouts likely would quash the current intentions with a reversal to hostile lawmakers and regulators who likely will look for scapegoats.

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