California Sees Light at the End of a Very Dark Week
As California kept its string of Stage One and Two power alerts
going through most of last week, the plot in its now six-month-old
drama thickened with an endless array of actors and subplots.
Without a break for intermission, the spotlight shifted to federal
officials in Washington, DC, late in the week for the second act of
steps that might bring some order to the chaotic western wholesale
electricity market covering about a dozen states.
"The FERC order is just the beginning of a whole set of
processes and negotiations that will now move forward," said Kellan
Fluckiger, COO of the California Independent System Operator
(Cal-ISO), who noted there will be improvements for the grid
operator's operations that should begin almost immediately and he
expects that to continue. He noted that FERC underscored the need
for long-term contracting and greatly increased generation capacity
in the state, both of which he agrees with.
"But until we can full address the supply situation, we are
going to be operating in tight markets," said Fluckiger, adding he
doesn't see the added capacity being sufficient until the summer of
2003.He said he was unsure how much and when electricity prices
would come down, but a lot will depend on what happens to wholesale
natural gas prices.
The possibility of rolling blackouts hung around California like
a coastal fog bank as state and federal officials tried to work out
longer-term remedies that would allow the state grid operator to
avoid its daily round of power alerts and near-emergencies that
have typified the first two weeks of this month. California
officials said by last Friday the state was "seeing benefits" of
the order Dec. 14 by DOE Secretary Bill Richardson, prompting a
"good response from a number of Pacific Northwest market
participants, particularly Bonneville Power Administration."
"We expect to receive ongoing and sustained benefits from the
DOE order now that it is actually issued. Its anticipation has been
a significant help in bringing supplies to the state," said
Fluckiger. On Friday, Cal-ISO officials were commenting that the
state's power supply picture was looking "better than it has in
quite a while." They expected to avoid more power alerts through
As tempers and electrons remained short most of last week, a
veritable Who's Who of the energy industry found their corporate
names being taken in vain by federal and state officials, along
with California's private sector utilities and vocal consumer
watchdog groups that think avarice has replaced reasonableness
among generators and marketers, most of whom have major national
and regional reputations.
Internationally known power plant developer/operator AES Corp.,
Arlington, VA, settled with a regional air quality district this
week, paying a record $17 million fine, for air emission violations
at one of the three major former Southern California Edison Co.
coastal plants the company now owns. The 2,000-MW Long Beach plant,
although still in violation, received special exemptions that have
allowed it to operate through the current crisis and it has not
been part of the 11,000 to 8,500 MW of load that has been
unavailable this week because of planned and unplanned outages.
Following an abatement order last September, AES curtailed about
2,000 MW of power in mid-November while it was working on a
settlement with the South Coast Air Quality Management District,
according to Aaron Thomas, a San Francisco-based manager for AES's
Pacific Region operations. The power was brought back on line last
week with an interim emissions permit.
"The settlement brings us back into compliance and allows the
units to operate during the next six months while emission controls
are being deployed so the plants will be available to help the grid
through this continuing crisis period," said Thomas, noting that
all 4,000 MW of AES's three plants should continue to be available.
"We hope to have all of the emission control work done by the
summer, preparing for another high-peak-demand period next year."
Other major national energy players were on a list of 13 western
supplier/marketers who last Wednesday reportedly refused to sell
into California until there were assurances given about the
credit-worthiness of the state-chartered independent transmission
grid operator, Cal-ISO, and the three investor-owned electric
utilities. Several of those companies have issued statements
denying they were refusing to sell into the state and thus bringing
California to the brink of having to institute rolling blackouts
The list released by Gov. Gray Davis's office included: Dynegy
Power Marketing; Trans Alta; Eugene (OR) Water and Electric;
Southern Energy Trading; PowerEx (British Columbia Hydro); Public
Service Company of Colorado; Enron Power Marketing; Portland
General Electric; Avista (Washington Water Power); Idaho Power
Company; PPL Montana; Seattle City Light; and Puget Sound Energy.
Dynegy's President/COO Steve Bergstrom said his company was
"inadvertently" included on the list, noting Dynegy "is not
withholding power from the California electricity market." Southern
and Enron echoed these denials through spokespeople in Atlanta and
"There has been a misinterpretation of the list of the companies
and the specific ones who expressed concerns about credit and/or
withheld supplies from the state," said Patrick Dorinson, Cal-ISO's
spokesperson. "There were concerns about the credit issue, but the
list did not necessarily mean that all the firms were not sending
any power to California because some of them were."
Late in the unfolding near-crisis Dec. 13, California's largest
utility, Pacific Gas and Electric Co., applauded the work of state
and federal officials to not only avert the need for rolling
blackouts, but for emphasizing "the irreplaceable role that
California's utilities have in powering the state's economy," a
reference indirectly aimed at stemming the continuing negative
views of the financial community toward the mounting debt, now more
than $8 billion that the PG&E utility and Southern California
Edison have taken on in the face of spiraling wholesale power
prices they have been forced to pay since the summer.
Almost simultaneously also in San Francisco, the California
Public Utilities Commission announced that it has revised a
proposed action for its Dec. 21 business meeting to address "the
extraordinary financial situation facing PG&E and Edison as a
result of current problems in the wholesale electric market."
The CPUC and utility responses prompted the state's San
Francisco-based utility watchdog group, The Utility Reform Network
(TURN), to blast the prospect of regulatory relief, alleging that
the CPUC was "caving into pressure from Edison and PG&E, who
are complaining that they are going bankrupt despite rising
corporate profits and billions in 'stranded cost' collections."
TURN and other consumer groups asked Gov. Davis to "rein in" the
regulators to keep them from "saddling the entire state with the
back-breaking bill for the most expensive public policy mistake in
Richard Nemec, Los Angeles