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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

Wood, would have exempted departing load from the fees if the customer installs "ultra-clean" technology, i.e., solar photovoltaics and other equipment with a minimal emissions profile-thus cutting out most gas-fired units. Units under 1 MW in size that sign up for net-metering options, capable of selling energy back to the utilities, would also be exempt. The third proposal, offered by CPUC President Michael Peevey and the newest commissioner, Susan Kennedy, exempted both the low-emission units and up to 3,000 MW of departing load, as well as any net-metering customers. After delaying the vote until April, Peevey was able to convince Commissioner Geoffrey Brown, who has become the swing vote on many energy and telecommunications decisions, to back the most market-permissive version of the ruling at the April 3 meeting.

Besides working to bridge the differences among CPUC members, Peevey has taken the lead in developing a new state energy policy. The recently released "joint energy plan" from the CPUC, the Power Authority, and the California Energy Commission is the best example of how the state can restore stability to the market and improve the investment climate, Peevey said. Besides articulating what he called "ambitious goals for reducing per capita energy consumption, installing new transmission and generation infrastructure, and furthering renewable resource goals," Peevey said the intent is to coordinate the actions of state energy agencies-something that has been missing from California's policy efforts for more than a decade. "We've worked hard at it," he said. "The people at these agencies now have a similar perspective as to where we should go." After finalizing a public review process, the new joint plan could be adopted by early May, Peevey indicated.

Regained Responsibilites

Among the few bright spots in the California energy picture-the PG&E bankruptcy and Edison credit status notwithstanding-is that as of Jan. 1, 2003, the utilities have regained power-procurement responsibilities from DWR. The amount of energy they are buying daily remains limited because of a weakened economy and moderate demand. So far, the biggest challenge has been to smooth out the bumps in delivery schedules built into the DWR purchase commitments, which frequently obligate the utilities to take too much power when it is not needed or from locations that are subject to transmission constraints.

Still, grid operators at the California ISO report much improved relationships with the utility schedulers compared with their problematic dealings with the California Energy Resource Scheduling (CERS) unit of DWR. ISO staff members were especially pleased when Edison bought firm transmission rights for the majority of its DWR contract power so that dispatchers no longer have to scramble to squeeze energy flows over congested lines.

Another group of players glad to see the utilities back in the procurement business are generation developers, especially those few with renewable power to sell from their facilities. Calpine Corp., one of the few generators that Gov. Gray Davis had not castigated as a market marauder, recently signed long-term contracts with PG&E and Edison for the output of its geothermal power plants. The deals boost the utilities' green power purchases under the