California Energy: Steps to a Solution
Steps Toward a Solution
The California legislature will sell $13.4 billion
in bonds for purchases of electrical power to be sold to the utility companies.
Current long term bids averaged 6.9 cents/kwh, Governor
Davis is targeting 5.5 cents/kwh.
Retailers have been required to cut outdoor lighting
in half during non-business hours.
Thirteen new power plants have been licensed, and
six are being built, with three new ones expected on-line by the end of
the summer with a total of 1,300 megawatts.
Senator Feinstein has projected a possible 2,000
to 5,000 megawatt deficit on hot days this summer due to air conditioning
Only 0.6% of our electrical power comes from oil
or diesel since natural gas is less polluting. Therefore, the President's
urging to open new oil exploration in the Arctic National Wildlife Refuge,
which would not produce oil for 10 years anyway, is not relevant to California
electrical energy. A natural gas pipeline from Alaska's north shore
would cost from $8 to $12 billion dollars. Shorter ones can be built
to sources in Canada.
Gov. Davis has ordered that approval for small "peaking"
power plants occur in 21 days instead of four months. However, the
time needed to plan and build these seems to be longer than can help in
the current summer.
Gov. Davis has ordered that approval for large plants
be cut to four months, down from a year at present.
Gas-fired turbines for peak demand (which pollute
more) will be allowed with air pollution credits shifted to trucks, buses
and heavy equipment.
The state has entered into $42 billion in long term
contracts at an average of $69 per megawatt hour, up to 20 years duration.
However, none of this will be available this summer
when the spot market costs at peak demand may be $400 per megawatt hour.
(LA Times, March 29)
With six plants under construction, only three will
be completed this summer, being Calpine in Contra Costa at 559 megawatts,
Calpine in Sutter County at 500 megawatts, and Texaco in Kern County at
320 megawatts. ( LA Times, April 19).
AES in Huntington beach was given permission (May
11) to restart their 40 year old units at 450 megawatts and run them for
10 years. That would bring the summer additional total to 1,830 megawatts,
although their startup may be delayed from August. The plant uses
300 million gallons of seawater a day for cooling.
Three more units are scheduled by next summer 2002
a total of 2,990 megawatts.
Seven more units are scheduled by summer 2003 with
about 4,100 megawatts.
The governor is assuming that "peaker" plants will
make up 40% of the deficit this summer.
However, 5,000 megawatts requires 768 million cubic
feet of gas a day, which is 10% of the state's current incoming pipeline
capacity. (LA Times, Feb. 9, p. A28 from AES Corp., Huntington Beach plant.
The conversion units below would indicate only 400 million cubic feet at
100% efficiency, so the plant is working at about 50% efficiency.)
During the summer, 14% of the state's electricity
usage comes from residential air-conditioners. The California Energy
Commission suggests thermostats be set at 78 degrees while at home, and
at 85 degrees or turned off when not at home. (LA Times, March 14)
Edison has agreed to sell its share of the transmission
grid to the state for $2.76 Billion to provide money for power purchases.
(April 10) This is 12,000 miles of lines. However, the sale
must be approved by the legislature and by the Federal Energy Regulatory
A new conservation measure law has been passed and
signed that will devote $850 million to conservation programs.
The Governor has promised a 20% rebate for power
savings this summer of 20% from June through September.
The 40% rate hike is designed to spur consumers to
save 2,000 to 3,000 megawatts, reducing the peak summer demand by 5%.
The LADWP is offering residential summer rebates
of $4/month for a 10% lower bill than last year, and $8/month for a 20%
lower bill. It will then sell the saved power at a profit to the
rest of the state. The moral is to conserve everywhere.
The FERC has finally acted for "price mitigation"
that would come into play at a Stage 1 alert (reserves within 7.5% of demand)
and higher alerts. It would require suppliers to continue supplying
power at the cost used by the most inefficient seller (see a loophole here?).
This could reduce the price of power by 40% (from
$500/megawatt-hour to $300/megawatt-hour) and be operative almost all of
the time this summer. (LA Times, April 26) The regulation starts
on May 29 and lasts for one year.
$500/megawatt-hour is the same as 50 cents/kilowatt
Before the crises, electricity cost $30/megawatt-hour.
Other loopholes are that this only applies to in
state generators, and it does not apply to electricity wholesellers.
The FERC also required a plan to organize a joint
grid for the West. Some have called this an illegal coupling of regulations.
FERC is now relaxing this requirement.
The FERC is also considering encouraging large industrial
users to sell some of their long term contract electricity to the grid
at a higher price by shifting some operation to non-peak times.
Projections (LA Times, May 1) by the governor's office
are that California will reduced energy consumption by 7%, and that 90%
of the alternative energy producers will be on line instead of the current
The California government is also projected to spend
$15 billion buying power this year, $9 billion next year, and $7 billion
the following, during which long term contracts, conservation, and new
power supplies come on line to lower costs.
With higher electric rates and the $13.4 billion
bond bill, the costs will be matched by November, 2002. However,
due to Republican opposition in the legislature, the bill did not pass
with a two-thirds majority which would have allowed immediate bond sales.
Hence, the state cannot sell bonds until August which will require budget
cutbacks to avoid running out of money during the summer.
President Bush has directed federal buildings to
conserve energy by setting thermostats at 78 degrees, allowing casual dress,
turning off coffee pots, nonessential lights, computers and printers when
not in use, and especially during peak demand. (LA Times, May 3)
Federal agencies are the nation's biggest energy
users. There are more than 265,000 federal civilian workers in California.
Lt. Gov. Cruz Bustamante, as a private citizen on
behalf of state taxpayers, is suing five power generators and 14 executives
for using their 19 California power plants to withold supplies and setting
electricity prices in a monopoly. (LA Times, May 3). The suit
document is on the website http://www.ltg.ca.gov/.
On a negative note, the house bill of Rep. Henry
A. Waxman (D-Los Angeles) requiring the FERC to use price caps failed by
a 20 to 12 vote of the House energy and air quality subcommittee (LA Times,
May 11). Voting AGAINST the bill and causing its failure were the
other three Californians on the committee: our own Rep. Christopher
Cox (R-Newport Beach), Rep. Mary Bono (R-Palm Springs), and Rep. George
P. Radanovich (R-Mariposa). The amendment may come up again before
the full House Energy and Commerce Committee.
The subcommittee did pass a bill by Joe Barton (R-Texas)
requiring federal facilities to cut usage 20% in states with emergencies;
to allow some power suppliers to suspend contracts with non-paying utilities
and sell elsewhere; to allow some users to sell power that they don't use;
and some other measures that don't appear applicable.
Blackouts at Stage 3 (within 1.5% of capacity) are
done in blocks of 100 megawatts, affecting about 100,000 people, for one
hour. Edison has 110 such blocks. The CPUC has ordered Edison
and SDG&E to do what PG&E does of notifiying users on their bills
of which block they are in, and then using their websites to notify users
which block is next for an outage. After that block is used, it is
moved to the bottom of the list.
The FERC is supposed to enforce the law requiring
only "just and reasonable" prices. Generators have had a three year
period of charging "market prices". However the FERC has ruled that
they have violated just and reasonable by exerting "market power", the
ability of a firm to raise market prices. The out-of-state generators
must apply to renew their market pricing before this summer. They
must prove that they will not exert market power. This is a time
for the FERC to act with meaningful just and reasonable pricing.
In an effort to cut office building electricity by
10%, owners and the Service Employees International Union of janitors are
establishing a program for janitors to turn off lights, and owners to install
energy efficient lights and motion sensors to turn off lights.
On a negative note, the president's budget cuts the
funds for energy efficient lighting, cooling and controls by 48%.
On another negative note, the suggestion of using
nuclear powered aircraft carriers and subs is not feasible since most of
the power goes directly to the propulsion systems, would require major
retrofitting, on shore construction, and would take that part of the fleet
out of service.
Bush's conservation plan will provide tax incentives
to encourage businesses to use more efficient power plants. While
I try to keep these pages non-political, isn't this paying the devil twice?
The generating companies already have plenty of our money that they have
not used to build new plants in California, although they have elsewhere,
and now we have to pay them a second time with our taxes to get them to
build plants? Give us a break.
Bush wants to provide a tax credit of $1,000 to consumers
buying a high mileage hybrid vehicle.
At the same time he will not back mileage restrictions
on SUVs and light trucks, until a National Academy of Sciences study is
complete. Senator Feinstein, cosponsoring such a bill, claims that
it would save 1 million barrels of oil a day.
A homeowner can save $400 dollars a year on Energy
Star Labeled appliances.
Governor Davis has asked generators to take a "haircut"
to accept only 70% of the $1.2 billion owed them by S.C. Edison, or he
might sign legislation imposing a windfall profits tax. If they don't
sell electricity this summer it might delay deregulation in other states.
The Dept. of Defense, which uses 1% of the peak demand,
will reduce peak use by 10% this summer and an extra 5% by next summer.
Four Californian House Republicans have defected
from the Bush policy and are willing to back price caps. They are
the bill's author, Rep. Duncan Hunter (R-El Cajon), Rep. Elton Gallegly
(R-Oxnard), Rep. Darrell Issa (R-San Clemente), and Randy "Duke" Cunningham,
Pool owners of the 1.1 million pools in California
can save money by switching from old 1.5 horsepower pumps to 0.75 horsepower
pumps that use only half the electricity and move more water. Keeping
the pool at 78 degrees also saves, since each one degree rise increases
the bill by 10%. Running the filter for only 4 or 5 hours a day saves
40% to 50% in energy (LA Times, May 20). The utilities hope to save
100 megawatts this way. Pool covers add 10 to 15 degrees, requiring
less gas for heating and less filtering as the pools do not get as dirty.
The cost drops drops from $210 per month to $120 per month. The cost
of running the filter for 4 hours a day is $130 a year.
The California Conservation Corps is going to distribute
1.5 million energy efficient bulbs. Over the 8000 hour lifetime of
the bulb, (which can be a two year usage), the money saved from reducing
from 100 watts incandescent to an equivalent light-giving 25 watts fluorescent,
at the peak 25 cents/kwh rate is 75 x 8000 watts x .00025 cents/watt =
$150 for a $10 bulb!
The 1.5 million x 75 watts = 112.5 megawatts, about
a quarter the size of a large natural gas generator. However, if
everyone in the state buys one bulb, that is a savings of 34 million x
75 watts = 2550 megawatts, or close to the projected deficit of 3,000 megawatts.
It is also larger than the output of two 1100 megawatt nuclear reactors.
(LA Times, May 19) Federal regulators will convene
a conference of experts to look into the high natural gas prices.
The cost of natural gas may be 80% of the cost of electricity during emergencies.
Natural gas which sold at $4.57/BTU at Texas producing sites, was being
sold for up to $13.54/BTU at the California border.
Vermont Sen. James Jeffords move from Republican
to Independent and the subsequent Democratic control of Senate committees
will have an effect on the California energy crisis (LA Times, May 24).
Sen. Feinstein will be likely to get a floor vote on her wholesale electricity
price control bill. The new chair of the Energy and Natural Resources
committee will be Jeff Bingaman (D-N.M.) who supports price controls.
However, such a bill would have difficulty in the house, and if it passes,
would probably be vetoed by President Bush. (Sen. Bingaman also supports
increased DOE funding for scientific research). He is also a chief
advocate of a bill regulating CO2 from power plants. Also ANWR
and nuclear power would be opposed.
Blackout forecasts will be given 48 hours in advance,
as part of a warning plan to start June 15. General areas will be
identified 24 hours in advance. One hour in advance, the block numbers
(which will be on new bills) will be given on radio, television, and the
SC Edison web site, http://www.sce.com/
. Hopefully, when announced, consumers will conserve more to try
to prevent an actual blackout.
Gov. Davis was promised that municipally owned utilities would sell excess
power to the state at prices significantly lower than the spot market.
Kern County, north of Los Angeles, is building six major gas fired power
plants that will add nearly 5,000 megawatts over the next several years.
DOE Secretary Abraham has ordered approval of a 1,500 megawatt upgrade
to Path 15, the 86 mile powerline between Southern and Northern California,
that is currently capable of 3,000 megawatts.
Only four out of 20 California Republicans back price control legislation.
Two more, however, Reps. Doug Ose (R-Sacramento) and Stephen Horn (R-Long
Beach) would back "price mitigation" that would expand FERC's regulation
to all times, not just emergency times.
About June 1, San Onofre restarted it second nuclear reactor at 1100 megawatts,
that has been down since a fire occured there earlier in the year.
The state now has half of its peak power under long term contracts, and
that is keeping prices down.
The cost of these contracts is said to be $138/megawatt hour through years
end, and $70 over ten years (Sacramento Bee, June 8).
Sen. Lieberman, now Chair of the Senate Oversight Committee, will
hold hearings June 13 on the deregulation of the electricity and natural
gas industries. On June 30, he will examine why FERC is not regulating
and urge them to do so.
Since May 31, when the El Paso pipeline contract to its subsidiary expired,
the markup between Texas and California for natural gas has fallen from
$6.32 per million BTU to 23 cents/ million BTU on June 8!
FERC can order El Paso to refund profits if it is found to have manipulated
the market. El Paso Corp. has claimed it is due to mild weather and
New red and green traffic signals use nearly 100 LED (light emitting diodes)
for a brighter light at only 15% of the power previously used. 76
Southern California cities are signed up so far, which will save 69 million
kilowatt hours each year.
Governor Davis has lifted pollution limits on power plants including 1200
megawatts of peaker plants. This is because the power is needed,
and without them, industries would resort to their own more polluting diesel
generators. Users will pay the pollution penalties as part of the
price, but the money will be used to eliminate pollution elsewhere.
New natural gas plants emit about half a pound of ozone producing nitrous
oxide per megawatt hour, whereas the units affected emit two to five pounds.
The PUC has approved altering contracts for the 600 small natural gas and
renewable energy generators that supply over 25% of the states power(LA
Times, June 14). Only 300 which supply Edison are initially affected.
They will work on 5 year contracts, and renewable energy suppliers will
get $53.70 a megawatt hour. This will help Edison pay debts to these
companies, but it is dependent on the legislatures approval of the Edison
The federal power agency, directed by President Bush, has invited outside
bids to build the addition to path 15. This would complicate Gov.
Davis's attempt to own the state's grid. The job will take $200 to
$300 million and take at least two years (LA Times, June 14).
On June 18, the FERC extended its price mitigation to full time and covering
11 western states (LA Times, June 19). It limits the price of power
to 85% of the price at the end of a Stage 1 emergency. Stage 1 occurs
when power needs come within 7% of available capacity. All five members
of FERC approved of this.
The plan covers the spot market in which 20% of the state's power is bought.
The curbs will expire Sept. 30, 2002.
The formula for calculating the price limit will be to calculate each plant's
cost of producing power based on the cost of fuel and an allowance for
operations and maintenance.
Then, the price limit for all producers will be that of the most inefficient
plant used during the emergency.
Generators can add on another 10% during power emergencies.
When there is no emergency, the maximum price will be 85% of the highest
price in effect during Stage 1 of the previous emergency.
Energy marketeers will not be allowed to charge a higher price than that
set by Cal-ISO for any given time. This applies throughout the West
to prevent generators from selling out of state instead.
The price of natural gas will also be monitored.
On June 19, SDG&E approved selling their 1,800 miles of transmission
lines to the state for one billion dollars.
With the SC Edison lines, the state would have 14,000 miles. 18,000
miles are still owned by PG&E.
Both purchases must still be approved by FERC and the state legislature.
This will save SDG&E customers $750 million in balloon payments for
past purchases of power.
SDG&E would also sell San Onofre nuclear plant power to the state at
a low price.
Curtis Hebert, Chair of FERC, is resigning effective Aug. 31.