California's pursuit of a centralized administrative solution in reliability hinders everyday operational issues.
Robert McCollough is managing partner for McCollough Research, an economic and financial consulting firm in Portland, Ore.
In March and April of this year, three California government agencies, the California Public Utilities Commission (PUC), the California Energy Commission (CEC), and the California Independent System Operator (Cal-ISO), expressed concerns about possible blackouts in Southern California this summer1—almost inconceivable by any traditional utility planning standards for a region with capacity margins above 30 percent for summer 2005.2
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Part of the problem reflects an error in planning-the continued treatment of California as a single region for planning purposes-but the larger issue is ideological. California's continued pursuit of a centralized administrative solution to reliability has left it ill-equipped to address everyday operational issues. In this case, a fairly simple exercise in prudent utility practice has been allocated among too many parties, and no one is actually in charge of a solution. It remains to be seen whether Gov. Schwarzenegger's plan to consolidate some functions of California's agencies within a new state Department of Energy will further complicate reliability planning or make it simpler.
The irony of the belief in better reliability through markets is that Cal-ISO's short-term purchases of system reserves could very well raise prices and reduce reliability.