Deadline for Power Reserves Moved Up

State regulators, hoping to avoid electricity shortages and rolling blackouts, approved a controversial plan Thursday that significantly moves up the deadline for California utilities to create power reserves capable of handling peak summer demand.

On a 3-2 vote, the Public Utilities Commission ordered investor-owned utilities such as Southern California Edison Co. to line up electricity supplies by June 2006 that are at least 15% greater than forecast needs. The deadline had been January 2008.

PUC President Michael Peevey likened the new deadline to “buying an insurance policy,” saying he wasn’t “willing to play Russian roulette with California’s future.”

“The next two summers are not going to be easy,” he said. “The sooner we lock up existing capacity in contracts, the more we can rest easy.”

The decision should bring “increased reliability for all California ratepayers,” said Ashley Snee, a spokeswoman for Gov. Arnold Schwarzenegger, who had made the deadline change a key component of his plan to restructure the state’s energy market.

Dissenting PUC members Loretta Lynch and Carl Wood accused the majority of caving in to political pressure from the governor and private power generators, which Lynch and Wood contended would profit from speeding up the call on utilities to sign new electricity contracts.

The commission created “a meaningless deadline to fulfill a political line in the sand,” Lynch said.

A rush to lock up power too quickly could create a sellers’ market for power providers, Wood said. Utilities would pay too much for electricity, he said, and pass those costs along to their customers.

Consumer advocates have attacked the plan as unneeded and potentially costly to ratepayers.

The debate over how much power utilities should have on hand and how quickly they should meet any supply goal is part of a larger argument over the best way to avoid the rolling blackouts and surging electricity bills that bedeviled the state during the energy crisis of 2000-01.

The effects of the crisis, which was caused in part by generating companies’ market manipulations, is still being felt by the state’s residential and business consumers, who pay some of the nation’s highest utility rates.

Private power generators swarmed into California after the state deregulated its electricity market in 1996. They bought old plants from utilities and sought licenses for dozens of new, efficient, natural-gas-fired turbine facilities.

Many of those plants were never built or only partially constructed after Wall Street investors backed away from the projects in the wake of the energy crisis. Peevey’s argument was that moving up the deadline for utilities to get electricity supplies under contract should lure power plant investors back to California.

The state’s investor-owned utilities have taken different positions. San Diego Gas & Electric Co. supports the accelerated deadline, but Pacific Gas & Electric Co., which serves Northern and Central California, has been neutral. Edison was originally in opposition but said Thursday that it supported the PUC action after receiving assurances that the commission would be on guard against market manipulation.

Adding urgency to the debate, the California Energy Commission warned last week that the state’s peak electricity demand grew 6% last summer, three times faster than expected. The commission also said that California’s growing population and economy, combined with overtaxed transmission lines and aging power plants, could cause power reserves to fall well below levels considered safe by next summer if the state and region get hit with extremely hot weather. Weather forecasters say there is a 1-in-10 chance of abnormally high temperatures occurring in any given year.

The threat of blackouts is expected to be more acute in Southern California than in the north.

At the PUC on Thursday, the dire predictions outweighed fears about paying too much for power from private generators, said Commissioner Geoffrey Brown, who voted with the majority.

“The situation in 2005 and 2006 and beyond is not good,” Brown said. “I think the price that we are paying is quite high, but we have to do it.”