The California Public Utilities Commission (PUC) may force companies to remain in power supply contracts which allow their electricity companies to cut supplies during periods of shortage in return for a large discount in the price of power.
The move follows a summer of power shortages in the state and fears that the situation could be repeated next year if these companies are allowed to opt out of their existing contracts.
Around 2500 companies in the state are thought to be affected by the interruptible supply contracts. Under the terms of these contracts the companies agree to reduce their consumption during emergencies. In return they receive a discount of around 15 per cent on the cost of their power. The total capacity in California involved in interruptible contracts is thought to be around 2800 MW, roughly 10 per cent of the daily peak demand.
During a series of heat waves from May to October this year, California suffered seventeen Stage Two alerts when operational reserves fell below 5 per cent of generating capacity. This is the condition which triggers the suspension of power to those customers with interruptible contracts.
Faced with the prospect of a recurrence during the summer of 2001, the PUC has issued a 16 page order stating that it will prolong the interruptible contracts to ensure a reliable and reasonably priced service in the state during the next few months.
However the companies are not all happy with the ruling. Many were expected to opt out during a 30 day window this November, fearing economic harm from a repeat of this year’s interruptions. A number preferred to pay pentalties of up to $9.30/kWh rather that reduce comsumption during alerts. Some businesses have questioned the state commission’s authority to deny them the right to opt out. The commission has quoted several sections of state law in defence of its move.
The shortage in California has been created by a mixture of deregulation and an economic boom which has led to soaring demand for electricity, often blamed on the burgeoning use of electronic and computer equipment. Now, while power companies want to build more capacity, environmentalists urge conservation as the first line of defence. The state, and increasingly the whole USA being forced to find an accommodation between the two sides.
Californian utilities are finding it increasingly difficult to build new power plants in the face of environmental objections. Enron was recently forced to re-site a wind farm after objections from ornithologists while PG&E Corp was prevented from mooring a floating power plant in San Francisco Bay to alleviate the pressure on the generating system.
The situation could be eased by greater interconnection between the different regional grids in the USA. California, for example, could take power from Texas which has a surplus. However the interconnections to transmit the power do not exist.
The Federal Energy Regulatory Commission is currently viewing proposals before determining new regulations for the high voltage grid system in the USA. This could eventually ease the situation but not in time to help California face a prospective power shortage in summer 2001.