NGI The Weekly Gas Market Report
NGI Archives | NGI All News Access
California Sees Light at the End of a Very Dark Week
As California kept its string of Stage One and Two power alertsgoing through most of last week, the plot in its now six-month-olddrama thickened with an endless array of actors and subplots.Without a break for intermission, the spotlight shifted to federalofficials in Washington, DC, late in the week for the second act ofsteps that might bring some order to the chaotic western wholesaleelectricity market covering about a dozen states.
“The FERC order is just the beginning of a whole set ofprocesses and negotiations that will now move forward,” said KellanFluckiger, COO of the California Independent System Operator(Cal-ISO), who noted there will be improvements for the gridoperator’s operations that should begin almost immediately and heexpects that to continue. He noted that FERC underscored the needfor long-term contracting and greatly increased generation capacityin the state, both of which he agrees with.
“But until we can full address the supply situation, we aregoing to be operating in tight markets,” said Fluckiger, adding hedoesn’t see the added capacity being sufficient until the summer of2003.He said he was unsure how much and when electricity priceswould come down, but a lot will depend on what happens to wholesalenatural gas prices.
The possibility of rolling blackouts hung around California likea coastal fog bank as state and federal officials tried to work outlonger-term remedies that would allow the state grid operator toavoid its daily round of power alerts and near-emergencies thathave typified the first two weeks of this month. Californiaofficials said by last Friday the state was “seeing benefits” ofthe order Dec. 14 by DOE Secretary Bill Richardson, prompting a”good response from a number of Pacific Northwest marketparticipants, particularly Bonneville Power Administration.”
“We expect to receive ongoing and sustained benefits from theDOE order now that it is actually issued. Its anticipation has beena significant help in bringing supplies to the state,” saidFluckiger. On Friday, Cal-ISO officials were commenting that thestate’s power supply picture was looking “better than it has inquite a while.” They expected to avoid more power alerts throughthe weekend.
As tempers and electrons remained short most of last week, averitable Who’s Who of the energy industry found their corporatenames being taken in vain by federal and state officials, alongwith California’s private sector utilities and vocal consumerwatchdog groups that think avarice has replaced reasonablenessamong generators and marketers, most of whom have major nationaland regional reputations.
Internationally known power plant developer/operator AES Corp.,Arlington, VA, settled with a regional air quality district thisweek, paying a record $17 million fine, for air emission violationsat 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 haveallowed it to operate through the current crisis and it has notbeen part of the 11,000 to 8,500 MW of load that has beenunavailable this week because of planned and unplanned outages.
Following an abatement order last September, AES curtailed about2,000 MW of power in mid-November while it was working on asettlement with the South Coast Air Quality Management District,according to Aaron Thomas, a San Francisco-based manager for AES’sPacific Region operations. The power was brought back on line lastweek with an interim emissions permit.
“The settlement brings us back into compliance and allows theunits to operate during the next six months while emission controlsare being deployed so the plants will be available to help the gridthrough this continuing crisis period,” said Thomas, noting thatall 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 thesummer, preparing for another high-peak-demand period next year.”
Other major national energy players were on a list of 13 westernsupplier/marketers who last Wednesday reportedly refused to sellinto California until there were assurances given about thecredit-worthiness of the state-chartered independent transmissiongrid operator, Cal-ISO, and the three investor-owned electricutilities. Several of those companies have issued statementsdenying they were refusing to sell into the state and thus bringingCalifornia to the brink of having to institute rolling blackoutsWednesday afternoon.
The list released by Gov. Gray Davis’s office included: DynegyPower Marketing; Trans Alta; Eugene (OR) Water and Electric;Southern Energy Trading; PowerEx (British Columbia Hydro); PublicService Company of Colorado; Enron Power Marketing; PortlandGeneral Electric; Avista (Washington Water Power); Idaho PowerCompany; 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 notwithholding power from the California electricity market.” Southernand Enron echoed these denials through spokespeople in Atlanta andHouston, respectively.
“There has been a misinterpretation of the list of the companiesand the specific ones who expressed concerns about credit and/orwithheld supplies from the state,” said Patrick Dorinson, Cal-ISO’sspokesperson. “There were concerns about the credit issue, but thelist did not necessarily mean that all the firms were not sendingany power to California because some of them were.”
Late in the unfolding near-crisis Dec. 13, California’s largestutility, Pacific Gas and Electric Co., applauded the work of stateand federal officials to not only avert the need for rollingblackouts, but for emphasizing “the irreplaceable role thatCalifornia’s utilities have in powering the state’s economy,” areference indirectly aimed at stemming the continuing negativeviews of the financial community toward the mounting debt, now morethan $8 billion that the PG&E utility and Southern CaliforniaEdison have taken on in the face of spiraling wholesale powerprices they have been forced to pay since the summer.
Almost simultaneously also in San Francisco, the CaliforniaPublic Utilities Commission announced that it has revised aproposed action for its Dec. 21 business meeting to address “theextraordinary financial situation facing PG&E and Edison as aresult of current problems in the wholesale electric market.”
The CPUC and utility responses prompted the state’s SanFrancisco-based utility watchdog group, The Utility Reform Network(TURN), to blast the prospect of regulatory relief, alleging thatthe CPUC was “caving into pressure from Edison and PG&E, whoare complaining that they are going bankrupt despite risingcorporate profits and billions in ‘stranded cost’ collections.”TURN and other consumer groups asked Gov. Davis to “rein in” theregulators to keep them from “saddling the entire state with theback-breaking bill for the most expensive public policy mistake inhistory.”
Richard Nemec, Los Angeles
©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |