Glitches Still Plaguing Power Deregulation


As the March 31 kickoff of California's new competitive electricity industry draws near, testing problems with the complex computer systems that will run the system are raising the possibility of another delay in the start date.

The long-awaited deregulation of the state's $20-billion power market was originally to take place Jan. 1, but that was put on hold in late December because the computer systems were not ready.

Now, after a week of tests to ensure that the transmission system will operate properly during periods of high demands, glitches continue, said Gordon Smith, president and chief executive of Pacific Gas & Electric Co., the utility subsidiary of San Francisco-based PG&E; Corp.

"There has got to be some improvement in the test results," said Smith, who runs one of California's three investor-owned utilities that are being required by the state to throw open their previously regulated markets to competitors. "There needs to be a lot of work done."

However, Smith said, "I remain cautiously optimistic that the software debugging will be successful," allowing the retail electricity market to open on March 31.

Similarly, Southern California Edison and San Diego Gas & Electric executives said they had heard of testing problems early in the week, but were unwilling to predict a delay.

California's groundbreaking foray into electricity deregulation is being watched carefully by other states following the same path. Another delay would mean that California's big business customers would continue to pay rates that are far above the national average, although residential and small-business customers got a 10% rate cut starting Jan. 1.

The delays have also caused big headaches for the dozens of independent power marketers that have descended on California to sell electricity. Numerous big contracts have been signed by major retailers, manufacturers and others, but the delays have added to uncertainty and confusion.

Critical components of the new electricity market are complex computer systems that act as a real-time trading floor for energy buyers and sellers and as a traffic coordinator for the electricity moving through the state's grid system. The two computer systems are taking on tasks previously performed by the state's utilities.

The job is so complex, for example, that the SDG&E; computerized energy management system has more lines of computer code than the system used to launch the space shuttle. Problems in integrating the two computer systems led to the previous delay in starting the new market.

The chairman of the California Independent System Operator, the agency set up under the state's deregulation law to manage California's power grid, said Monday that test results have improved substantially in the last few days.

"There were bumps in the road" early last week, "but those have been identified and dealt with," said Jan Smutney-Jones.

"The systems are operating now as they were designed to," Smutney-Jones said. "We are pretty confident that we will be able to start the market on March 31."


Bloomberg News was used in compiling this report.

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