Stressing that the state has more than adequate power supplies this summer and in future summers, the California Energy Commission (CEC) last week raised its estimates of power reserve levels after 2005 as part of a generally upbeat future power update by the state’s agency handling power plant siting and energy planning. The energy agency sees reserve margins in California as high as 20% this summer.

“While electricity supply resources appear to be sufficient for this summer and the next two years, there is an ongoing need to monitor new capacity proposed for the period starting 2006 and beyond,” the commission said in the update to its five-year outlook.

While the energy commission thinks the reserve margins will begin to decline in 2006 to as low as 11.5% in 2008, the overall levels under what it calls “the most likely weather scenarios” will be above previous estimates that predicted reserves might go as low as 8.8% in August 2008.

Even with what the CEC called “very hot weather and no spot market imports,” its forecasters see the state having a reserve of 8% during the peak months of July through September, the update said.

In contrast to the new state forecast, however, a report commissioned by the California Manufacturers and Technology Association (CMTA) last week indicated that electric reserve levels could get dangerously low in the 2006-07 time frame if current uncertainties and disincentives for private investment in energy projects are not resolved soon.

The study by the nonprofit Bay Area Economic Forum (BAEF) in San Francisco concluded that a “stable source of energy” is needed to assure a growing economy and healthy manufacturing sector. The report uses California Energy Commission (CEC) data from earlier in the year — not the latest estimates released last Tuesday. BAEF President Sean Randolph said he doesn’t think the difference is significant. He noted that the updated statistics also see “possible” reserve problems in 2007 or 2008.

The BAEF report raises more caution flags, however, and for earlier years. “What we found the most interesting in the study is the role regulatory uncertainty plays in whether or not you get new supplies,” said Dorothy Rothrock, governmental vice president for CMTA. “Prior to [state electricity] restructuring, some investment — not a whole lot — was made in energy, and frankly that was one of the reasons for restructuring. During the crisis, there was such chaos that trading in supplies declined, wholesale prices declined and now we have continuing uncertainty as to what this market will look like.”

Focusing on issues that affect California’s economic competitiveness, the BAEF report is the fourth in a series completed over the past three years since the power crisis arose in mid-2000, Randolph said. “It looked at whether we have a continuing problem regarding electricity reserves, and the short story is we do.

“Absent blackouts over the last couple of years and with wholesale prices being a whole lot lower, the policymakers can be forgiven for thinking we are out of the woods, but we are definitely not out of the woods,” he said during a media conference call. “The report concludes that the return of another electricity shortfall in California and even higher retail prices has only receded; it is just over the horizon and definitely hasn’t gone away.”

Without sufficient conservation efforts and the creation of “an environment that is more conducive to private sector investment,” California could face “significant price challenges and supply shortfalls in the very near future,” Randolph said. The BAEF study is available on the economic study group’s web site (www.bayeconfor.org).

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