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State Regulators: Driven By Reliability

Can natural gas supply keep up with demand for power?
Fortnightly Magazine - November 2004

should lead to the development of additional infrastructure in California, both on the supply side-including additional renewable and conventional generation, as well as transmission-and the demand side, including energy efficiency and demand response. As part of ensuring reliable supplies of natural gas for the state, the CPUC is challenging the ruling of FERC, which stated that FERC has sole jurisdiction over the safety and siting of LNG facilities in California.

Q: Does California have enough gas and electric infrastructure to ensure service reliability, and are adequate incentives in place to encourage building new facilities?

A: New power plants must be built in California. Energy efficiency and demand response are key, but they cannot meet the full need, and California's economy will depend on our ability to build new power plants where they are needed. The CPUC's pending procurement implementation order will give the utilities the authority and guidance they need to solicit third-party power plant proposals and also to propose more traditional utility-owned power plants themselves. We are also developing a new power plant bidding process that will be open and transparent.

In May 2004, we approved contracts for two new large power plants near San Diego-Palomar, which will come online in 2006, and Otay Mesa-totaling over 1,000 MW of capacity. Additionally, as part of our commitment to a diversified resource mix, at the same time the commission approved a 45-MW plant designed to meet peak loads, a 45-MW renewable project and up to 30-MW of demand response. In December 2003, the CPUC approved Southern California Edison's 1,054-MW Mountainview Project, which will come online in 2006. In addition, several new plants, such as the Metcalf facility in San Jose, will be in operation by 2006.

Further, to meet the near-term energy needs of California, the commission is working closely with the independent system operator and the investor-owned utilities to ensure that existing power plants are kept operational until they can be replaced with newer, cleaner, and more efficient plants.

Finally, transmission has to be available to get the power to the consumer. The CPUC has approved three new transmission projects this summer. The Pacific Gas and Electric Co. (PG&E) Jefferson-Martin 230-kV line will beef up capacity in San Francisco and the Peninsula by 2007; the Mission-Miguel 230-kV line will give San Diego customers access to new generation near the California/Mexico border and in western Arizona, along with relieving congestion in the San Diego Gas and Electric Co. territory; and the Viejo System Project will improve local reliability in the Mission Viejo area of Southern California Edison's territory. These projects join the more than 10,000 MW in transmission system expansions approved by the CPUC since 2001.

Q: What is the future of retail competition in California for gas and electric consumers?

A: One approach that the CPUC has been examining is the idea of a Core/Noncore retail market structure that would balance the desire of electric utility customers for choice in service offerings and providers with the needs of the utilities and California for planning certainty and the timely recovery of costs for