California’s Energy Supply: Preparing For Summer 2000 & Beyond
State Capitol, Room 112
March 14, 2000
1:30 p.m. to 2:15 p.m.
I. Opening Comments
- Senator Debra Bowen, Chairwoman
II. Addressing Peak Demand
- Kellan Fluckiger, Vice-President of Operations, California Independent System Operator
III. A Roundtable Discussion
- Michael Kahn, Chairman, Electricity Oversight Board
- William Keese, Chairman, California Energy Commission
- Loretta Lynch, Commissioner, California Public Utilities Commission
- Mike Florio, The Utility Reform Network
- Steven Schleimer, Pacific Gas & Electric Company
- Gary Schoonyan, Southern California Edison
- Carolyn McIntyre, San Diego Gas & Electric
California’s Electric Supply: Preparing For Summer 2000 & Beyond
Issue Overview
March 14, 2000
Background
On February 8, 2000, the Senate Energy, Utilities & Communications Committee held an informational hearing to look at the short and long term adequacy of California’s energy supply.
California has experienced a significant increase in energy use in recent years, which isn’t surprising given the growth in the state’s population and the lack of new power plants coming on line. The overall demand for power has yet to outstretch the supply, but on several occasions, the state’s operating reserve has dipped below the 7% level required to be maintained by the Western Systems Coordinating Council.
At the Committee’s February 8, 2000 hearing, the California Energy Commission (CEC) and the Independent System Operator (ISO) testified that in the summer of 1998, the state’s power reserve dropped below the mandated 7% level four different times. Overall, the system was under the 7% reserve level for about 200 hours in 1998, which amounts to 2.23% of a year.
While electric reliability obviously must be guaranteed, ensuring that reliability by building power plants and transmission lines to increase the energy supply to a level that the demand reaches only 2.23% of the time is arguably a costly solution that makes little sense if there are cheaper or more efficient solutions available.
Demand Side Management: A Short Term Approach With A Long Term View
Conservation and demand side management tools were discussed during the Committee’s first hearing and emerged as relatively low-cost options that make sense in both the short and long term energy supply pictures.
For the short term, demand-side management tools are really the only option available, since it takes several years to permit and build new power plants or transmission lines.
In the long run, while three new power plants are scheduled to come on line in 2001 and eight more are slated to open in 2002, the system will always need more help when severe weather and peak demand spikes occur. Demand-side approaches should be considered in any long term plan to address these and other focused needs throughout the state as California’s energy marketplace evolves into a more competitive framework.
The ISO’s Plan To Address Peak Demand
The ISO has developed and will detail for the Committee a 1,000 megawatt emergency load reduction plan it hopes to put in place by June 15, 2000. Under the program, the ISO would impose a small fee on all energy users, thus spreading the cost of a program that will directly or indirectly benefit every energy user in California across the largest possible base. The money collected from that charge – which is estimated by the ISO to total in the neighborhood of $50 million – would be used to buy back energy load during peak demand times when the state’s operating energy reserve threatens to dip below 7%.
Ensuring Statewide Coordination
The ISO isn’t the only organization with an energy conservation plan – the CEC, the California Public Utilities Commission (CPUC), the Electricity Oversight Board, and many of the investor-owned and municipal utilities have their own plans as well. While a diversity of approaches should be encouraged, it does raise the question of who is or who should be in charge of coordinating the state’s energy conservation efforts.
Put another way, if ten entities have plans to conserve 200 megawatts each, who is in charge of determining whether these efforts add up to 2,000 megawatts in energy savings or if these ten entities are counting on saving the same 200 megawatts?
Public Goods Programs
About 3% of each electricity bill in the state goes to fund four separate "public goods" programs – energy efficiency, renewable energy, low-income energy services, and research and development – that are managed by the CPUC and the CEC.
These public goods programs, in particular the $228 million energy efficiency and conservation program administered by the CPUC through the investor-owned utilities, have had some success in addressing environmental and economic energy needs throughout the state. Given these successes, if additional one-time funding were to be provided to any of the four public goods programs, can the CPUC or CEC quantify the types of energy savings any additional monies would buy? If they can, would those energy savings be available in 2000 or would any savings more likely be realized in 2001 at the earliest?