While the California governor’s press people were promising anannouncement and then reneging late Thursday afternoon, at leastone other power supplier, Williams, announced signing a 10-year,1,400-MW deal with the state water resources department (DWR).Meanwhile, supply shortages eased considerably yesterday for thefirst time in about six weeks.

Williams yesterday became only the second company to stepforward with a long-term deal. The deal, which would start April 1,calls for at least 175 MW of peaking power, increasing to 350 MW byJune 1 and at least 900 MW by 2006. Calpine signed the otherlong-term agreement last month. The advent of these two deals beingsigned with the state has heightened expectations for a settlementwith the utilities that will open the door to more comprehensivesolutions before the start of the summer peak-demand season.

Expected today is some word on a deal between the state and thethree major investor-owned utilities for California to buy thepower lines and operate them with a newly created power authority.The legislation that would create the power authority passed onehouse of the state legislature this week.

With the new momentum toward more signed power deals, includingWilliams’ long-term transaction and Reliant Energy’s agreement toprovide 30 days of spot emergency supplies and have them handled byDWR, the grid operator, Cal-ISO, for the first time in 40 dayslifted all power alerts Thursday. (Reliant made the move despitebeing owed more than $300 million for power by the state’s ISOand/or utilities.)

A combination of factors contributed to this, but principallythe availability of more than 5,000 MW of imported power from thePacific Northwest and a sharp drop in peak demand allowed thestate-chartered transmission operator to the lift its lastremaining Stage One alert. It has saw the amounts of real-timeemergency power that it had to purchase drop to about 10% of thestate’s demand, the lowest it has been in months. Generationcapacity out of service for planned or unplanned reasons stayedabout the same (8,000 MW).

“This is a really huge improvement in managing the state’sreliability,” said Cal-ISO spokesperson Stephanie McCorkle, addingthat for the past week DWR has been able to push more of its powerpurchases out of the spot market, easing the planning pressure onthe grid operator.

Late Wednesday the governor released a report identifying 32potential sites for temporary electric generation peaking plantsthat theoretically could be available to supply power during thissummer’s expected severe peak-demand crunch, if a special 21-dayexpedited processing scheme ordered under new state law by thegovernor Tuesday has its intended results. The California EnergyCommission completed the report identifying the sites and it wouldadminister the fast-track processing for the temporary facilities.

“I am determined to get as much power online as humanly possibleby this summer,” said Gov. Gray Davis in a prepared statement. “Icommend the energy commission for its swift action in developingthis report.” Davis ordered the report two weeks ago in one of themany executive orders he has issued to try to begin resolving thenagging energy crisis enveloping the state.

The energy commission report identifies what are described as”an initial round of sites that have a 95 percent or betterprobability of being licensed under the state’s emergency sitingprocess.” All of the sites are large enough to accommodate plantsof 50-MW or larger in size.

The potential sites are all reportedly near transmission andnatural gas supply lines and in areas where there are available airemission offset credits. The energy commission’s next step will beto work with local governments in the designated areas to make surethere are “no overriding land-use restrictions that would preventthe temporary power plant operations.

Ironically, the governor’s scramble to line up added megawattsfor the summer peak-demand period in which the state could be asmany as 6,000 MW short was dealt a blow with the appeal of the cityof Huntington Beach to slow down state energy commission processingof AES’s request to reactive two old natural gas-fired units thatwould bring another 450 MW on line this summer. It representsalmost 10% of the 5,000

Williams provides all the fuel for the AES plants in California,including the one at Huntington Beach.

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