Energy in California: new crisis, or business as usual - PowerPoint PPT Presentation

1 / 16
About This Presentation
Title:

Energy in California: new crisis, or business as usual

Description:

The politics and economics of the legacy. Electricity: regulation, markets, or both? ... California imports average 20% per year, exports 10 ... – PowerPoint PPT presentation

Number of Views:71
Avg rating:3.0/5.0
Slides: 17
Provided by: rmich
Category:

less

Transcript and Presenter's Notes

Title: Energy in California: new crisis, or business as usual


1
Energy in California new crisis, or business as
usual?
  • Robert J. Michaels
  • California State University Fullerton
  • and
  • Tabors Caramanis Associates, Cambridge MA
  • rmichaels_at_fullerton.edu

  • Marin County Council

  • of Governments

  • Green Brae, California

  • Oct. 27, 2004

2
That was then, this is now
  • Legacy of the 2000-2001 electricity crisis
  • The politics and economics of the legacy
  • Electricity regulation, markets, or both?
  • Return of planning or rebirth of markets?
  • Customer choice and utility formations
  • Generation supply and demand, once more
  • Transmission the system operator and the new
    markets
  • Natural gas the other half of the energy
    picture
  • Beyond todays horizon

3
Electricitys basic governance
  • Federal Energy Regulatory Commission FERC
  • Non-local transmission, electricity sales for
    resale
  • Interstate gas pipelines
  • California Public Utilities Commission CPUC
  • Cost-based rates to final retail users
  • Administer corporate utility customer choice
  • New / old role in utility planning
  • California Energy Commission CEC
  • Approval of larger new powerplants, forecasts
  • Governmental and Cooperative utilities
  • Federal marketing, Municipals, Irrigation
    districts
  • California Independent System Operator ISO
  • Operates transmission owned by three corporate
    utilities
  • Runs day-ahead and real-time energy and reserve
    markets
  • Under 10 percent of deliveries pass through
    markets

4
The end of the good old days
  • 1994 High power prices, CPUC rulings
  • 1996 AB 1890 new markets, transition costs,
    divestitures, rate freezes
  • Atop a basic supply/demand imbalance
  • Numerous causes of 2000-01 price run-up
  • Law was a gamble on low day-to-day prices
  • Utility insolvency and bankruptcy
  • State long-term contracts deal in haste, repent
    for a decade
  • Prices are over market two months after signing

5
Todays questions
  • Federal / state tension re markets
  • FERCs mission statement
  • Federal preemption issues transmission
  • What rights for customers to choose?
  • Utility organization in the future
  • Buy or build?
  • State role in resource planning, renewables
  • The Governor, legislature, and CPUC
  • Advisors and appointments, term limits

6
Aftermath of the state contracts
  • State contracts plus utility resources post-
    1996-1998 divestitures nearly meet load
  • Contract power diminishes over 10 years
  • Allocating costs to customers of individual
    utilities
  • Phased-in return to procurement by utilities
  • AB 57, SB 1008 require CPUC to set up procurement
    and planning procedures
  • 2004 utility procurement plans
  • Important data redacted for commercial reasons
  • PUC imposes resource 15-17 reserve requirements
    on utilities
  • May be imposed on all load-serving entities

7
The new planning
  • Integrated resource planning of 1980s
  • Four-year biennial plans, market modeling,
    politics
  • Must failed reforms imply a return to IRP?
  • Renewable resource requirements
  • How quickly, what are definitions, how clean?
  • Demand management and pricing reforms
  • How frozen will plans be?
  • SCEs Mountainview episode
  • Big question is who will own generation
  • Utilities rewarded for what they spend
  • Indep.power politically important, wants
    contracts

8
Bulk power markets
  • FERC Dependable, affordable energy through
    sustained competitive markets
  • Contract and short-term markets cover west
  • Cost-based charges giving way to market-based
  • California imports average 20 per year, exports
    10
  • FERC favors Regional Transmission Operators and
    standard market design
  • Cal-ISO markets operating under redesign MD02
  • Possible consolidation of RTO West (northwest),
    WestConnect (sw) and Cal-ISO
  • Resistance to RTOs in northwest and southeast

9
Retail customer choice
  • Direct access to continue for 10 of load
  • Poorly designed, suspended in crisis
  • Almost surely coming core / non-core
  • Customer separation by size and alternatives
  • Has worked well in gas, need not harm small users
    but will force rational cost allocation
  • Utility resistance AB 2006 Edison bill
  • New utility cost recovery guarantees
  • Restrictive re noncore customers, return
    conditions
  • Rewritten to death, passed narrowly and vetoed
  • Electricity is different

10
New utilities
  • Assorted attempts to evade contract cost
    allocations by forming distribution islands
  • AB 117 2002 allows community choice
    aggregation by municipal governments
  • Utilities will distribute this power as usual
  • Questions re allocation of state contract costs
    and customer reversion to utilities
  • Spot municipals on undeveloped city land
  • Eliminate costly, time-consuming condemnation
  • Questions re costs of power supplies to meet
    loads, dependence on gas-fired generation

11
New resources if any
  • Flurry of new plant announcements 2001, many
    since cancelled
  • Financial health of builders, uncertainty re
    policy
  • Up to 9,000 MW (12 of CA capacity) of aging
    plants may be retired by 2008
  • CEC sees deficiencies by or before 2006
  • Inclusive of imports and demand management
  • Proposals (Bay Area Econ Forum) for stopgap
    generator retention policies
  • Proposals (CEC and others) for pricing reforms
    and additional demand response programs

12
Transmission the big shortfall
  • Not a third world grid, but badly stressed
  • Problem paths in Calif. Growing
  • Path 15 being built, San Diego not
  • Power flows like water, no valves in grid
  • Over 50 of N-S Calif flow goes out of state
  • But 1935 law gives states siting authority
  • Many states permissive re local protests
  • Decline 1978-2002 of 1.5 / year in capacity
    relative to throughput, up 50
  • Means higher cost generation, more health risk

13
Transmission Federal or state?
  • Blackouts and legislation
  • Aug. 2004 National Governors Conference
  • Reliability in failed 2004 energy bill
  • Congress does not sever reliability provisions
  • National Interest Economic Transmission
    Corridors NIETC
  • Federal backstop orders if states do not approve
    projects FERC says are needed
  • Liberal standards (high prices) for issuing order
  • Power flow patterns probably mean orders can be
    issued for lines outside of corridors

14
Gas the local picture
  • Nationally wellhead prices rising, reflects
    increased cost of accessing new gas
  • Not running out, just more expensive
  • Reserves have risen in past three years
  • Pipelines to Calif adequate except at peaks
  • In-state Southern Calif pipe capacity adequate,
    northern short
  • General agreement re desirability of additional
    (underground) storage in-state

15
Gas the bigger picture
  • Regulatory change induces increased use
  • Efficient small powerplants
  • More stringent environmental laws
  • Interstate pipes have fed eminent domain
  • Feds asserting jurisdiction over liquefied NG
  • Concerns re excessive gas dependence for
    electricity generation in west, not east
  • The biggest picture the beginning of a
    worldwide gas market

16
Off in the distance
  • Power markets are here or arriving worldwide,
    generally desirable
  • California cannot dwell on memory of a bad first
    experience, other states getting it right
  • Incremental reform is particularly important in
    electricity, because we know so little about what
    markets can and cannot do
  • Electricity ceased to be a local affair decades
    ago, and sooner or later the law will catch up
    with reality.
  • Do not count on a bigger crisis (Kyoto) to allow
    evasion of responsibility
Write a Comment
User Comments (0)
About PowerShow.com