NERC: CA Summer Problems Worse Than Predicted

Supply deficiencies facing the California Independent System Operator (Cal-ISO) this summer will be worse than anticipated by the Cal-ISO, and California residents should brace for a higher number of rolling blackouts over the coming months than they experienced last summer or this past winter, according to a widely anticipated report unveiled last week by the North American Electric Reliability Council (NERC).

Details of the report, 2001 Summer Assessment: Reliability of the Bulk Electricity Supply in North America, were disclosed by several NERC officials at a press conference in Washington, D.C. "The assessment concludes that California will experience difficulties meeting its projected electricity demand this summer, and California electricity users will experience rotating blackouts, much more so than last summer or this past winter," said Michehl Gent, NERC's president and CEO. Along with the main report, NERC also issued a special assessment examining expected summer conditions in California and the Pacific Northwest.

NERC points out that projections made by Cal-ISO in its March 22 report indicate that resources will not be sufficient to meet peak demand requirements this summer, and that resource limitations may also lead to shortfalls during non-peak times. The council said that it believes that Cal-ISO and the Western Systems Coordinating Council (WSCC) have identified all potential problems that may be experienced in California this summer and concurs with the overall conclusion that there will be supply deficiencies. However, based upon more recent information, NERC believes that the deficiencies will be more severe than projected by Cal-ISO because many of the assumptions the ISO included in its March assessment now appear overly optimistic.

While NERC believes that peak demand in the Cal-ISO control area will be less than that projected by Cal-ISO due to demand response to recent rate increases and new conservation programs not included in the ISO's assessment, this decrease is more than offset by concerns related to the amount of available resources to serve the demand. NERC estimates that Cal-ISO will most likely experience supply deficiencies in the range of about 4,500 MW to 5,500 MW at the time of peak demand for each summer month (2,000-4,000 MW more than the Cal-ISO projections, depending upon the month selected) and expects rotating blackouts to occur. NERC said that a probabilistic analysis conducted using NERC's estimates of available resources indicates that there will be about 260 hours of exposure to rotating blackouts in the Cal-ISO territory over the course of this summer. NERC stated that the average size of each outage will be about 2,150 MW. The actual magnitude and duration of firm demand curtailments will depend heavily on the effectiveness of demand conservation efforts and the continued ability of Cal-ISO operators to take appropriate action during emergencies, according to NERC.

In addition, NERC estimates that under "best case" conditions, Cal-ISO could have as much as a 2,500 MW capacity surplus over its required resources, and that under "worst case" conditions, it could experience deficiencies up to 13,000 MW. But NERC hastened to add that both of these scenarios are deemed unlikely. NERC went on to note that Cal-ISO has developed best case and worst case resource scenarios. The ISO's adverse outlook scenario estimates resources of 6,500 MW less than expected conditions, according to NERC, while Cal-ISO's favorable outlook scenario estimates resources of 5,000 MW more than expected conditions. NERC believes Cal-ISO's adverse outlook resource scenario to be the most probable condition.

Tim Gallagher, manager of technical services at NERC, acknowledged that there are a lot of plans to add new generation in California, but he likened the state's situation to gaining weight. "If you gain 20 pounds over 10 years, you're not going to lose 20 pounds overnight. It's going to take time for California to catch up," he said.

Turning to the Pacific Northwest, NERC concludes that the region is expected to serve all firm demand this summer, but will not have electricity available to export to California and elsewhere. Further reduction in water supply, extended forced outages of major thermal units or higher than forecast peak demand or energy requirements will result in an internal energy shortfall, NERC added.

Meanwhile, NERC also cautioned that New York City, New England and Texas should be closely monitored, despite having adequate resources to meet demand. New England and New York City are particularly sensitive to long-term heat waves and higher-than-expected generating unit forced outages, according to NERC. Texas will undergo a major shift in operation in June when it opens up to full retail access and consolidates 10 control area operations into one, NERC added. The report concludes that generating capacity resources should be adequate to meet projected electricity demands in other areas of North America this summer.

The conclusions reached by NERC in its report came under fire from the Electric Reliability Council of Texas (ERCOT) and ISO New England last week. "I strongly disagree with the characterization of our position, as suggested in the NERC press release, that Texas might experience difficulties over the next few months," said ERCOT CEO Tom Noel. "We have more than adequate operating reserves of power and should absolutely not be considered in the same category as New England and New York City," he added. For its part, ISO New England reiterated that there should be a sufficient supply of electricity to meet New England's energy needs this summer. More specifically, ISO New England said that NERC's report did not take into account power provided by a firm agreement with Hydro-Quebec in Canada. At least 1,500 MW of electricity is typically available from Hydro-Quebec, ISO New England noted.

NERC's 2001 summer assessment, as well as the special assessment, are both available for download at NERC's web site, www.nerc.com.

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