Project to Boost Flow of Energy
A group of major energy companies will play a key role in building a new power transmission line to ease a notorious bottleneck that limits the flow of electricity from Southern to Northern California, Energy Secretary Spencer Abraham announced Thursday.
The deal would potentially give the private companies the ability to influence the price and flow of electricity on a pivotal segment of California’s transmission grid. State officials have previously expressed dismay about such a possibility, which could make less transmission available for other parties and increase the price of electricity transmission.
The chronic electron traffic jam on the so-called Path 15, near Los Banos in the Central Valley, was partly responsible for California’s rolling blackouts in January. Capacity limitations along the link limited the flow of electricity from Southern California, which had a surplus, to power-starved Northern California.
The new pathway, a $300-million project, will be built by the private companies in a consortium with public agencies named Thursday by the U.S. Department of Energy.
“We are taking a major step toward a solution that will relieve the pressure of this choke point in the transmission grid,” Abraham said during an afternoon news conference at Stanford University. “This proposal will benefit California ratepayers without burdening taxpayers.”
But key details remain to be negotiated on how much each partner would own and how electricity would be moved along the new line, which is expected to be operating as early as summer 2004.
President Bush directed the Energy Department to find a way to pay for the expansion of Path 15 without federal funds. The pathway is an 84-mile stretch of high-voltage transmission wires that are capable of moving nearly 3,800 megawatts between Northern and Southern California.
The corporations that are financing and helping to build the project would be allowed to charge tariffs on power transmitted over the new 500,000-volt transmission line, Abraham said. The line would boost capacity by about 1,500 megawatts, or enough to serve 1.1 million typical homes.
Most of the winning bidders were energy companies, including Pacific Gas & Electric Co., which owns the six existing Path 15 transmission lines, and PG&E;’s unregulated sister company, National Energy Group, which builds power plants and buys and sells wholesale electricity. PG&E; is operating under bankruptcy-law protection, but National Energy is not.
Other companies participating in the project are Williams Energy of Tulsa, Okla., a major electricity seller in California; Kinder Morgan Power, a subsidiary of the Kinder Morgan natural gas pipeline company of Houston; and Trans-Elect Inc., a Washington, D.C., company that earlier this year offered to buy the electricity transmission grid for California’s troubled utilities.
The project manager will be the Western Area Power Administration, a federal agency that markets power from federal dams in the West. A key participant will be the Transmission Agency of Northern California, a municipal utility group that owns a major transmission line between California and Oregon.
Path 15 has been slated for expansion for more than a decade but has become a growing problem in the last few years as electricity demand has increased.
PG&E; has resisted creation of more capacity. State regulators, in a proceeding separate from the federal plan, have ordered PG&E; to expand Path 15.
PG&E; President Gordon Smith applauded the proposal, which would require less investment by the insolvent utility than the competing state plan.
“The project posed by the [Energy Department] envisions an innovative public-private partnership where the parties will not only share the benefits but each will share an appropriate level of project costs,” Smith said.
Federal law mandates fair fees and open access for electricity sellers to transmission lines. But owners of transmission rights can sell the ability to move power in a secondary market operated by the California Independent System Operator that critics contend is subject to manipulation.
San Francisco-based PG&E; and Trans-Elect committed Thursday to cede their transmission rights to Cal-ISO, but such a commitment is not required in the preliminary agreement to build the transmission line, said Robert L. Mitchell, executive vice president of Trans-Elect. At least two of the companies participating, National Energy and Williams, routinely move electricity on the state’s grid.
Mitchell said revenue from the new transmission line would be regulated by the Federal Energy Regulatory Commission and would provide investors with a “modest return.”
Consumer activist Harvey Rosenfield criticized the deal, telling Associated Press that California would have been better off if the state had bought the transmission lines. Gov. Gray Davis proposed a transmission grid purchase but was unable to get support from PG&E; or the Legislature.
“I don’t think it’s in California’s interest to have the federal government and a bunch of out-of-state energy companies on the spigot that controls the flow of electricity in California,” said Rosenfield, founder of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
