U.S. Invites Private Funding for Grid Expansion
Private energy companies could own rights to a key piece of California’s electrical transmission grid, thereby gaining influence over the flow of electricity and its price, under a plan launched Wednesday by the federal government.
At the direction of President Bush, a federal power agency Wednesday invited “outside parties” to help pay for the expansion of Path 15, an 85-mile stretch of high-voltage wires in the Central Valley that constrains the flow of power.
Pacific Gas & Electric owns the original wires, which can move about 3,000 megawatts of power, but the financial backers of an expansion would win the rights to move an additional 800 megawatts on the new lines.
Any company or utility hoping to move electricity through that choke point would have to pay the owners of the transmission rights a fee and abide by their rules.
The federal solicitation for investment sets up a showdown with California, which is urging Pacific Gas & Electric to expand its existing lines at Path 15. Gov. Gray Davis also is pursuing outright purchase of the transmission grids owned by PG&E;, Southern California Edison and San Diego Gas & Electric.
“What you have is two processes on two different tracks,” said Jim Pope, president of a group of municipal utilities eager to expand Path 15.
He said the hope of his organization, called the Transmission Agency of Northern California, is that “we don’t go down different tracks and end up in a train wreck at Path 15.”
The federal government has power of eminent domain, like PG&E;, but would not have to go through a state Public Utilities Commission review process to expand Path 15.
Path 15 will become increasingly important to the state as the dozens of long-term contracts recently signed with power producers take effect. Many of those contracts are for power generated in Southern California, which must be squeezed up Path 15 to meet demand in the Silicon Valley and San Francisco.
Ray Hart, deputy director of the state Department of Water Resources, which signed the power contracts, called the federal effort to attract partners on a Path 15 expansion project “disconcerting.”
“I think the governor’s plan to acquire the transmission [grid] is good for the people of California,” said Hart. “I think it protects them from marketers that would have a tendency to want to lock it up and jack the rates up.”
Federal law mandates that transmission grid owners offer fair fees and open access. But owners of transmission rights can sell that ability to move electricity in a secondary market, and experts say that in the complicated rules that govern transmission rights, there is room for manipulation. Transmission constraints can influence price by barring some buyers and sellers from reaching one another.
“If you’re going to pay for 25% of the line, then you’re going to want 25% of the line for your own use,” said Armando Perez, director of grid planning for the California Independent System Operator, which manages much of California’s electron highway system. “It makes less transmission available” for others.
The Path 15 power lines near Los Banos have been eyed for expansion for at least a decade. As California’s demand for electricity swung upward in the last five years and the state opened its electric industry to competition, the congestion at Path 15 worsened. The choke point was a culprit, grid operators say, in the mid-January blackouts in Northern California.
As part of his national energy plan announced last month, Bush directed the U.S. Department of Energy to investigate outside interest in financing a fix for Path 15.
U.S. Energy Secretary Spencer Abraham put the federal effort in the hands of the Western Area Power Administration, which sells the electricity produced at 55 powerhouses on federally built reservoirs in the West.
“Western Area Power Administration wants you,” states a news release the agency issued Wednesday. “That is, if you are interested in partnering to finance and co-own necessary improvements to relieve a transmission bottleneck in California.”
Just how much transmission capacity the backers of the project would win title to is up for negotiation, said power administration spokesman Dave Christy.
Energy industry officials said they expect interest from both electricity and natural gas companies. Companies have until July 12 to indicate how much they would be willing to finance of a job expected to cost $200 million to $300 million and take at least two years.
Representatives of several power generators and marketers said Wednesday that it was too early to know whether their companies would seek to gain transmission rights on Path 15.
But Trans-Elect, a company based in Washington, D.C., is definitely interested, said Executive Vice President Robert L. Mitchell.
He said he intends to send a letter next week to Southern California Edison chief John Bryson, offering to buy the utility’s transmission grid for $1.8 billion. Trans-Elect aims to create a national network of independently owned electrical grids, with profits coming from transmission fees.
Davis has offered Edison $2.76 billion as part of a complicated plan to restore the utility’s financial health. Edison officials had no comment Wednesday on Mitchell’s offer.
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The California Grid
Electricity is moved throughout the state on a 32,000-mile network of power lines carrying current at up to 500,000 volts. The electricity is “stepped down” in a series of substations and transformers for different levels of use in industry and in homes.
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PATH 15: Energy bottlenecks sometimes occur on Path 15, a critical group of high-voltage lines that move power between Northern and Southern California. Congestion occurs when power demands exceed their transmission capacity of about 3,000 megawatts. Maintenance, accidents, vandalism and lightning strikes can also lead to bottlenecks.
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Sources: California Energy Commission, California Independent System Operator
Researched by NONA YATES/Los Angeles Times
