Electricity demand in Cali-fornia has soared along with power prices. During the past few weeks power system managers have declared a number of alerts, including a stage three power emergency which means electricity supply reserves had dipped to 1.5% of demand. Any further increase in demand would have triggered rotating blackouts.

Such escalating demand was attributed to a spell of cold weather, while the low reserves were attributed to maintenance related plant shutdowns.California had been on the verge of ordering rolling blackouts across the state several times in the summer months of 2000. Although a localised series of blackouts was ordered in the San Francisco Bay area on 14 June 2000, due to a power shortage, none were ordered on a statewide basis.

  The grid was probably saved by a supply of power from the Western Area Power Administration, which sent electricity over the lines from its hydro facility at the Glen Canyon dam. In the meantime consumers reduced demand, while others, such as the California Department of Water Resources, shut down pumps that bring water from the north to the south for crop irrigation.

Another option under consideration to avoid blackouts is the Bonneville Power Administration (BPA), which operates federal hydro power dams in the Pacific Northwest, declaring an emergency and developing more electricity at its dams. Such a declaration would allow BPA to lift restraints currently imposed on power development at Columbia river dams — its operation of the dams are now more geared to the needs of anadromous fish, protected under the Endangered Species Act, rather than to meet power demands. BPA sources say this option would only be considered as a last resort to avoid blackouts which could pose a threat to human life.

The power system in California, the first US state to deregulate, appears to be in such disarray that the US Energy Secretary had to intervene to ensure that out-of-state suppliers delivered power to the ‘golden state’.

The problems with power supply and prices in California first came to a head during the hot summer of 2000, when soaring demand pushed spot prices to more than ten times the prices that prevailed in 1999. Consumers, hit by the power prices, took to the streets in San Diego and forced a moratorium on pricing.

In November 2000, the Federal Energy Regulatory Commission (FERC) declared that the electricity marketplace in California was ‘dysfunctional’ and that wholesale energy prices passed along to consumers were ‘unjust and unreasonable’. Even now, the average prices for a MWh of electricity is often four times the price of just one year ago. The California Public Utilities Commission (CPUC) has imposed temporary rate caps to shield consumers. However, utility companies that have been forbidden to pass along higher rates to many consumers are racking up billions of dollars in uncompensated costs.

In the meantime one of the co-authors of the 1996 legislation that deregulated the state’s electricity market, is now pressing ahead with a plan that would take US$2B from California’s US$10B forecast surplus next year and devote the money entirely to energy needs. The state itself is considering taking over large sectors of the electricity market, including the construction of new generating plants. A citizens group is also preparing a ballot initiative for 2002 that would turn over the California electricity market to residents.

In the 1990s, California residential and industrial customers were paying prices somewhat above the national average for their electricity. At the time California’s power system was dominated by three large utility companies, which built generating plants and then sold their power to customers in different regions, with rates set by state controllers and the industry. Under the direction of former Republican governor Pete Wilson, the CPUC recommended deregulation of the electric power industries, and legislation was passed in 1996.

The CPUC believed that deregulation and competition would encourage the construction of cleaner power plants and bring new electricity generators into the state, which should lower rates. However, the free market appears to have produced higher rates and no new power plants, while the demand for power has soared in the 1990s due to the booming economy.