‘Interruptible’ Power Has Winners, Losers
When California experienced weeks of power emergencies this winter, industrial customers complained bitterly that an obscure utility incentive program had backfired, forcing them to choose between shutting down or coughing up outrageous fees.
But since the California Public Utilities Commission defanged the program Jan. 26, some of the 1,400 major power users that signed up for the program have begun reaping a quiet windfall, while others are coping with irreparable losses.
Thanks to the PUC, customers on utilities’ so-called interruptible lists are no longer subject to power shutdowns or financial penalties. They do, however, still get hefty rate discounts, utility officials said.
Moreover, state regulators are expected to waive much or all of the penalties incurred during the power crisis’ peak, erasing the consequences for companies that did not honor pledges to drastically reduce their power use.
Among the big winners: companies like Irvine communications chip maker Conexant Systems Inc., which had warned that its penalty fees could total as much as $5 million, but now expects a refund for the $700,000 it paid for November and to have the remainder expunged.
“We didn’t know what would happen, but it looks like we’re going to come out better,” company spokeswoman Lisa Briggs said. “Our shareholders will be happy.”
Ironically, the customers who will not benefit from the expected amnesty are those who played by the rules and dropped their usage, sometimes at the expense of closing their doors or laying off workers.
“You try to do the right thing and you get screwed for it,” said Brooks Hilton, plant manager for Waterways Plastics in Oxnard, which shut down more than a dozen times in January for fear of incurring what may turn out to be purely hypothetical penalty fees.
“With the PUC able to change the rules as we go along, how can you know what to do?” he wondered. “In hindsight, yeah, I wish I’d kept running.”
The interruptible program’s premise was designed for simpler times.
Large power users received discounts in exchange for agreeing to cut usage when state reserves grew thin, giving power grid managers a tool with which to avert rolling blackouts. When interruptible customers failed to power down enough, they were supposed to face penalties at multiples of their usual rates.
Most on the list assumed they would rarely suffer the program’s downside. Indeed, there were no interruptions in 1999 and just one in last year’s first half. They also did not expect that in November the PUC would block customers from either leaving the program or adjusting the terms of their plans.
When California experienced weeks of Stage 3 emergencies in December and January, the interruptibles split into two distinct groups.
Larger corporations, schools and public institutions such as hospitals shed what consumption they could, but typically decided that fees were preferable to deeper cuts.
“The students get one chance at a dance production, one chance at a music recital,” said Dean Houchin, vice president for administration at the California Institute of the Arts in Valencia, a Southern California Edison interruptible customer that incurred penalties 15 times this winter.
Manufacturers, especially those with thinner margins, mostly concluded they could not afford that course--a decision some now rue.
“If you’re a large company with deep pockets, you could financially absorb the penalties,” said Paul Strong, owner of Poly-Tainer Inc. in Simi Valley, which closed its doors temporarily. “I obeyed all of their shutdowns. There is no remediation for that.”
Business groups, which mounted fierce attacks on the program on behalf of both blocs, vigorously support a fee rebate, but acknowledge that it will not fully compensate those who endured stoppages.
“With regard to productivity and inability to meet time schedules, they were damaged during this process,” Orange County Business Council spokeswoman Julie Puentes said. “But everyone had that option. You can’t say they played by the rules and others didn’t.”
Most of the much-bemoaned fee money never actually changed hands.
Pacific Gas & Electric assesses penalties annually, and says it has not charged anything for the last year, let alone January. Many Edison and San Diego Gas & Electric customers, including the California Institute of the Arts, have not yet been billed for the crisis’ worst days.
The school has joined a consortium of 15 private colleges that hired an attorney and a consultant to get their fees reduced or waived.
They may not need them. The PUC has instructed utilities to track penalties, but not to collect them. The agency will issue its waiver decision after analyzing their data and receiving surveys from interruptible customers.
Puentes said she thinks that the commission will scrap fees starting Nov. 1--the abandoned opt-out date--but that it also may order customers to return the amount they saved in discounts.
“It’s only fair,” she said.
