California power grid in big trouble, drastic action needed: CEC

Los Angeles (Platts)--16Sep2005

The California Energy Commission believes the state's electricity system
faces critical issues requiring swift and decisive action. A report by the
regulatory body paints a bleak picture given the state's rapidly growing
population and business sector; spiraling energy prices of $20/MWh in 2001,
$50/MWh in 2005; potential supply shortages; and an inadequate and aging
energy delivery infrastructure. The report said electricity consumption is
expected to grow between 1.2% and 1.6% annually.
     The report--a draft of its 2005 Integrated Energy Policy Report, was
released late Thursday and is scheduled to be discussed at a series of
hearings later in September--said the growing threat to California's way of
life is attributable to the state's minimal progress toward meeting the goals
of the CEC's 2003 and 2004 energy reports. 
     California's energy infrastructure is increasingly unable to meet the
state's energy delivery needs, according to the report. In particular, the
electricity transmission system has becoming more stressed in recent years.
Under-investment in that system is reducing system reliability and increasing
operational costs, costing California ratepayers over $1-mil in congestion and
related reliability services in 2004, the report said.
     The report offers a series of recommendations, including having the
California Public Utilities Commission require that utilities buy enough
resources under long-term contracts to cover annual loads as well as long-term
forecast needs. 
     This would encourage the building of new power plants, and the retirement
or repowering of older power plants, the report said. There is currently 7,000
MW of generation already permitted on which construction is stalled, because
of the lack of available long-term contracts, it said.

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