Hydropower Highlighted in SDG&E; Buyout Plan

If the government took over San Diego Gas & Electric Co. today, the new municipal utility might be able to buy lower-cost electricity from the Pacific Northwest, but it would be difficult to transmit that power to San Diego County customers, utility industry observers say.

Investor-owned utilities control most of the power lines that link California with the Pacific Northwest. For 20 years they have effectively blocked most of California’s municipal utilities from using the lines to transmit power from other western states. Only the Los Angeles Department of Water and Power, the nation’s largest municipal electric utility, enjoys significant transmission access.

Better Off With Merger

Gaining access to those transmission lines is so difficult that, under today’s conditions, San Diegans who favor hydroelectric power might be better off under the proposed merger of San Diego Gas & Electric with Southern California Edison, the Rosemead-based utility that controls a hefty portion of the transmission system that links energy-hungry Southern California with the power-rich Northwest, say SDG&E; officials.

But state Sen. Larry Stirling, who is trying to block the SDG&E-Edison; merger and replace it with a municipal buyout of SDG&E;, said he believes the power blockade could be broken by the construction of a new, “consumer-owned” power line. Eventually, Stirling added, the state could even condemn existing lines and purchase them for the regulated use of public and investor-owned utilities across the state.

Hydropower as Main Plank

Stirling, a San Diego Republican, is using the hydropower issue as a main plank in his argument for a government takeover of SDG&E.; He contends that a municipal utility would be better positioned, and more inclined, to buy clean, cheap power from the Northwest rather than investing more heavily in non-renewable and air-fouling fossil fuels.

That hydropower, Stirling argues, could come from the federal Bonneville Power Administration and from BC Hydro, a Canadian company owned by the province of British Columbia. Hydropower is typically cheaper than electricity produced by oil- or gas-fired electrical generating plants.

“This is a decision for the next 100 years,” Stirling said. “It’s really an attitude or a process that says, ‘We have a right as San Diegans to address our energy future.’ ”

Spokesmen for Bonneville and BC Hydro said their agencies have or plan to have sufficient surplus power to ship to Southern California.

The agencies market their electricity in two ways. One is a simple energy sale, where the purchaser buys the electricity for money. The alternative is what is known as a “capacity-energy exchange,” where utilities transfer electricity back and forth to meet each other’s needs during peak hours.

BC Hydro is on the verge of a major expansion aimed at the U.S. market, according to Doug Forrest, vice president of marketing for POWEREX, a BC Hydro subsidiary. He said the company is watching the San Diego situation closely.

“The province wants to get into the long-term business of selling power to the U.S.,” Forrest said. “Initially, we would be looking at 400 to 600 megawatts. But we think that’s just a start.”

According to Steve Wright, manager of Bonneville Power’s California marketing office, BPA has a dwindling supply of energy that it can put up for simple sale. But the agency has a surplus of 1,500 megawatts of capacity and is ideally suited to trading it with Southern California.

When Southern California needs energy to power its air conditioners on hot summer days, the cooler Northwest usually has plenty to spare, Wright said. The California utilities can return the borrowed energy at night, when needs are lower, or in the winter.

Utilities Still Benefit

Although the California utilities typically return more energy than they receive, they still benefit because the transfers allow them to postpone or avoid building new, expensive power plants.

“As long as the cost of energy they’re providing to us is less than what it would cost them to meet their capacity needs without us, then they’re getting a good deal,” Wright said.

Federal laws give California’s municipal utilities a slight advantage over investor-owned companies in bidding for Bonneville’s power. While the price is the same for either entity, an investor-owned utility would have its supply curtailed sooner in the event of a shortage, Wright said.

But SDG&E; officials downplay the value of hydropower for Southern California. The San Diego utility currently has no long-term contracts for hydropower, and, in 1988, when low rainfall limited the supply of hydropower on the spot market, SDG&E; used the resource for just 2.5% of its needs.

Even if SDG&E; used all the hydropower it could now transmit to San Diego, the supply would only meet about 10% of SDG&E;’s total customer demand for electricity, according to SDG&E; Power Contracts Supervisor Mike Strong.

‘Loaded Up as Best We Can’

“If we continued to be independent, we would continue to use hydropower as we have in the past,” said Jim Kenney, SDG&E;’s manager of fuels and power contracts. “We have loaded up as best we can during times when hydro is plentiful. I suppose during times when certain hydro contracts come up for renewal, we will probably put in to get an allocation of it.”

Kenney added that the proposed merger with Edison, which has access to roughly 1,500 megawatts of hydropower, would probably bring more of the resource to San Diego than either the status quo or a government takeover of SDG&E.;

“San Diego will wind up with a higher mix of hydro than it has today,” he said.

Even if hydropower were available and a San Diego customer wanted to buy more of it, getting the electricity to the county would be difficult, many in the industry say.

Part of the problem is that California’s north-south transmission system--like the state’s freeway system--is old and crowded. Building new transmission lines is an expensive and time-consuming process because local residents usually oppose them as undesirable land uses.

Additional Problem

There is an additional problem: The public owns the state’s freeway system, but the Pacific Intertie, the only north-south high-voltage transmission system connecting California and the Pacific Northwest, is controlled largely by Southern California Edison and Pacific Gas & Electric.

The two investor-owned utilities control about two-thirds of two lines that travel through California to the Oregon border. Edison, PG&E; and the Los Angeles Department of Water & Power, the nation’s largest municipal system, control 86% of a third line that cuts through Nevada on its way to the Pacific Northwest.

That ownership structure has severely limited use of the lines by other Southern California municipal utilities such as Anaheim, Riverside and Azusa.

Ten years ago, the municipal systems initiated a federal court battle to gain access to the intertie. Transmission has gained in importance because “we’re like islands in the middle of Edison,” according to Gordon Hoyt, general manager of Anaheim’s municipal utility.

Peter Matt, a Washington, D.C.-based attorney who has represented the municipal utilities in their fight to gain access to the intertie, said the municipals are basing their legal claim on a St. Louis railroad case decided in the early 1900s. A judge in that case determined that one train company could not refuse to give competitors access to a bridge over a river.

10-Year-Old Battle Continuing

“Without that bridge, you couldn’t reach the train terminal, and without that terminal, you didn’t have a business,” Matt said.

The 10-year-old federal court battle is continuing.

Edison critics contend that the Rosemead-based utility simply doesn’t want to give publicly owned competitors in California access to cheaper hydropower available in the Northwest.

“It’s sort of like saying there’s so much food in the world that nobody need starve,” according to Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group. “Supply isn’t the problem--distribution is.”

Edison declined to discuss available capacity on the intertie lines that it owns. “That is something that will be discussed in (upcoming) regulatory proceedings,” Edison spokesman Lewis Phelps said last week.

340-Mile Line Proposed

Concern about future access to transmission lines led 15 municipal utilities in Northern California to propose a 340-mile transmission line that could become operational by 1993, according to Steve McClary, a staff person with the Sacramento-based Transmission Agency of Northern California.

The 15 municipal utilities, including the Sacramento Municipal Utility District and the Modesto Irrigation District, would own 42% of the proposed “California-Oregon Transmission Project.” Municipal utilities in Southern California--such as Anaheim, Riverside and Banning--would own about 7.5% of the new line.

The state’s three largest investor-owned utilities would own 40% of the project. Edison would own 17.5%, PG&E; would own 20.4% and SDG&E; would own 2.9%. However, the state Public Utilities Commission has yet to grant required permits that would clear the way for the investor-owned utilities to take part in the $400-million project.

Sen. Stirling suggests that a municipal utility in San Diego could dramatically increase SDG&E;’s share of that line or work to build yet another. He also said he will support legislation first proposed last year to require all utilities to provide access to their lines to “wheel” power around the system.

Beyond that, Stirling advocates a public takeover of all the state’s long-distance power lines, an idea that would be fiercely fought by the investor-owned utilities that built the lines.

State Should Condemn Interties

“The idea that the interties are public networks is to me the right answer,” Stirling said. “There are some things that it is just better to have a consumer network do. This is one of them. The state ought to go ahead and condemn all the interties and pay for them, and make clear that the interties are available to anyone who wants to transport electricity, north or south.”

That politically Draconian solution would give municipals access to cheaper hydropower produced by the Bonneville Power Administration. But it still would be difficult to transmit power from BC Hydro, because transmission through Washington and Oregon is largely controlled by Portland Power & Light, a subsidiary of Portland-based Pacificorp, which recently merged with Utah Power & Light.

In that merger, the Federal Energy Regulatory Commission required the newly created utility to open up transmission access to competing utilities. But the utility contends that there is no room on the lines for its competitors.

California’s municipal utilities have asked federal regulators to order similar transmission access in the proposed merger between Edison and SDG&E.; Not surprisingly, Edison is opposing any federal attempt to broaden transmission access.

Stirling acknowledges that today’s conditions are not the best for a municipal utility hoping to gain access to Northwest power. But he brushes aside many of the problems by saying that he is “dealing not in what is, but what can be.”

The cost of investing in hydropower would be nothing compared with the price the United States has paid to keep oil flowing into this country from abroad, he said.

“We have polluted our beaches, we have distorted our economy, we have subjected ourselves to Middle Eastern warfare, sacrificing the lives of our servicemen,” Stirling said. “It has been an incredible national effort.

“Getting a power link from here to Bonneville pales in comparison.”

SOURCES OF HYDROELECTRIC POWER MAJOR NORTH-SOUTH TRANSMISSION LINES INTO CALIFORNIA Line: Pacific AC Intertie Capacity (MW): 3,200 Operator: SG&E; Users (percentage of capacity): Sacramento Municipal Utilities District (6.3%); Federal Government agencies (12.5%); State of California agencies (9.4%); PG&E; (35.9%); SCE (30.9%); SDG&E; (5%) Line: Pacific DC Intertie Capacity (MW): 1,958 Operator: LADWP Users (percentage of capacity): Los Angeles Dept. of Water & Power (40%); Burbank (3.85%); Glendale (3.85%); Pasadena (2.3%); PG&E; (25%); SCE (21.5%); SDG&E; (3.5%). Line: Proposed “California-Oregon Transmission Project Capacity (MW): 1,600 Operator: Transmission Agency of Northern California Users (percentage of capacity): SMUD and Modesto Irrigation District (42%); Municipal utilities in Southern California (7.5%); SCE (17.5%); PG&E; (20.4%); SDG&E; (2.9%). MAJOR EAST-WEST LINES: Intermountain Power Project (owned by LADWP and five smaller municipal utilities in Southern California) McCullough-Victorville (LADWP) Eldorado-Lugo (SCE) Palo Verde-Devers 1 (SCE) (A proposed second line would be abandoned if SDG&E; merger occurs) Southwest Power Link (SDG&E;) Sources: Southern California Edison, San Diego Gas & Electric, Pacific Gas & Electric