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Sowing the seeds for California Crisis II?

Experts say that many of the new policies by the PUC and the state legislature seem to be putting the Golden State on track for more blackouts.
Fortnightly Magazine - May 1 2003

state's renewables portfolio standard (RPS) adopted last year.

New Generation Slow To Come

Despite the governor's 2001 crisis commitment to install 20,000 MW of generation over four years, only about 5,725 MW of new facilities actually operate. Although the CEC has approved licensing for another 7,635 MW, nearly 3,300 MW of that construction has been suspended. The CEC additionally reports that 20 projects totalling 5,000 MW of new capacity have withdrawn from its siting process since the power crisis began.

There is another 8,679 MW of capacity awaiting certification, but each month more of that prospective energy is cancelled or withdrawn.

"There's almost nothing in the pipeline," lamented Ronan. "You can't build without financing, and you can't get financing without contracts."

Not all of the generation losses have been because of market prices or lack of contracts. In some instances, local opposition based on traditional NIMBY concerns has stymied new development-regardless of how much the power might be needed to meet future demand in specific areas.

San Francisco offers a case in point. Mirant Americas Development Inc. has put environmental hearings on hold for its $500 million Potrero No. 7 modernization project in the city. The 540 MW project has received a preliminary recommendation for approval from CEC staff. It would provide sufficient capacity to avoid problematic transmission upgrades into the city, and cover the retirement of the aging Hunters Point station, while improving environmental impacts from the existing unit.

The CEC staff would approve the plant if it could come up with sufficient emissions offsets, and they have hinted that the entire siting process-now two years along-would go a lot smoother if Mirant would agree to use more expensive air-cooling technologies rather than rely on water cooling.

The suspension, however, came about because Mirant is trying to resolve air-quality problems with the Potrero No. 3 unit. To maintain this 207 MW baseload facility, Mirant will need to install selective catalytic reduction equipment on Unit No. 3 before new emissions limits take effect in 2005.

"Without this plant, the lights don't stay on in San Francisco," said Mirant's Potrero Project Director Mark Harrer.

Efficiency Efforts Take a Hit

One area of energy policy in which California has traditionally been a national leader-energy efficiency-continues to offer cost-savings opportunities for customers and new business prospects for entrepreneurs. The big problem, according to Elizabeth Lowe, vice president of efficiency provider Onsite Energy, is uncertainty.

"What's happening is that people are at a standstill, they're so shocked at the rates now," Lowe said. "Most are just trying to stay in business, and they cannot put up the capital for efficiency."

It has always been true that the best way to avoid rate increases and utility cost liabilities is to use less energy. Even though high-technology remains in the doldrums and manufacturing is hanging on by a thread, Lowe said there is no dearth of efficiency opportunities.

The best sector for business currently is California's massive agricultural and food-processing industry. For these customers, demand-controls are proving to be cost-effective investments, while improvements in cold-storage equipment can provide