Power Prices Climb as Crisis Continues

California’s electricity crisis burned into another day as a seventh consecutive power emergency was declared Sunday and a record average price was set in the state’s primary electricity market.

Near-freezing temperatures in much of the Pacific Northwest remain a concern today because electricity imports from that region, which California has come to depend on, could be unavailable.

The Arctic cold front means “we’ll be getting nearly zero electricity imports,” on which California has come to depend, said Stephanie McCorkle, spokeswoman for the California Independent System Operator, which oversees the electricity grid serving most of the state. “It’s going to be a challenging week.”

Electricity demand peaked at nearly 31,000 megawatts Sunday, bringing California within 5% of running out of available power and plunging the grid into another Stage 2 emergency at 5 p.m., said the Folsom-based nonprofit agency, known as Cal-ISO, which acts as an electricity traffic cop for about 75% of the state and secures emergency power when reserves reach dangerously low levels.

Cal-ISO asked that about 200 megawatts of power be interrupted to some large commercial and industrial customers that have prearranged for that option. The power cuts came only in Northern California, which was short of electricity because of low imports. In addition, constraints on transmission lines to the region made it difficult to move power from Southern California, where more generating plants were operating.

Earlier in the day, Cal-ISO declared a Stage 1 emergency--the 45th this year--when electricity reserves were projected to fall below 7%, and it urged Californians to continue their conservation efforts. The state has been slammed by 28 Stage 2 emergencies since May; on Thursday, the state endured its first Stage 3, when reserves threatened to fall below 1.5%, but narrowly avoided rolling blackouts.

Customers of the Los Angeles Department of Water and Power, which has more than enough electricity to meet its needs, are unaffected by these electricity woes. But hourlong blackouts, if ordered, could sweep across most other municipal utilities because those areas are in the territory covered by Cal-ISO or have agreements with the organization. In addition to the DWP, the utilities serving Glendale, Burbank and parts of the Imperial Valley would be exempt from Cal-ISO-ordered blackouts.

About 10,500 megawatts of generation--enough to serve about 10.5 million typical homes--remained unavailable Sunday largely because of planned maintenance or operational problems. But a 1,100-megawatt unit at the Diablo Canyon nuclear plant near San Luis Obispo was expected to restart in the evening after a two-day outage.

In response to the continuing high demand and a loosening Friday of the Cal-ISO price cap of $250 per megawatt-hour, the price of electricity for Monday delivery hit a record average of $611 per megawatt-hour on the California Power Exchange, where most of the state’s electricity is bought and sold. The highest price of the day was $821.80 for the 7 a.m. hour.

“Everyone is waking up then. That morning coffee is draining the grid,” exchange spokesman Jesus Arredondo said. The previous top average daily price was $252, reached Friday.

Because of the price cap, electrons were fleeing the state in search of prices as high as $5,000 a megawatt-hour last week and Cal-ISO technicians were spending too much time haggling over price. So Cal-ISO Chief Executive Terry Winter decided Friday to allow his workers to pay California power plant owners more than the current price cap. Owners would have to be ready to show auditors that the higher costs of generating electricity justify a higher price.

Although the Monday prices are steep, volume in the market is fairly good, Arredondo said, “which makes us think this reflects a pretty honest price.”

California is not alone in its power headaches.

Electricity has become so pricey in the Pacific Northwest that Kaiser Aluminum Corp., the second-largest U.S. aluminum maker, said Sunday that it will shut its smelter in Mead, Wash., for about 10 months and lay off about 400 employees. Houston-based Kaiser said it has resold the electricity it was to receive this month from the Bonneville Power Administration, netting proceeds of $52 million, or nearly nine times the $5.9 million that the company has earned so far this year.