A Chance to Empower the State
It sounds like an echo from a bad dream: The agency that maintains California’s electric grid is once again warning that the Southland could see blackouts if this summer is really hot.
And it’s not only the California Independent System Operator that’s worried about power supplies in Southern California, where growing demand for electricity is bumping up against available generating capacity. Federal officials are chiming in too. “Southern California has the worst electricity supply situation in the entire country,” Joseph Kelliher of the Federal Energy Regulatory Commission, said recently at a conference in San Francisco.
Such words recall the debacle of four years ago when a flawed experiment in deregulation collapsed in a riot of rip-offs, political confusion, corporate bankruptcies, job losses and skyrocketing electricity prices that threatened the state’s economy.
Are we headed for another electricity fiasco in 2005?
Happily, not likely. The authorities were not harking back to the disaster of 2001, they were prompting the state’s power providers to build new electrical plants and renew old ones.
Indeed, Southern California has a golden opportunity to head off future calamities.
But we’d better not blow it.
Now is the time for expansion of capacity -- and vision.
New power plants must be built and old ones renewed. Transmission lines must be built to bring power into the state from surpluses at the Arizona and Mexican borders and other states. New forms of power generation -- solar and wind and geothermal -- are becoming possible.
This region needs more electricity because its economy is growing, and so is its use of electric power -- extraordinarily so.
In Southern California Edison’s territory -- Los Angeles and Orange counties plus San Bernardino and Riverside counties -- electricity usage grew 4.5% last year and as much as 6% in the hotter inland areas. In San Diego Gas & Electric’s territory, especially in the desert regions east of the port city, growth is 4% to 5% per year. These growth rates are expected to continue.
This is a major change. Electricity usage locally had been going up 1.5% to 2% annually for years. Across the U.S., the average increase over the last two decades has been about 2% a year.
The demand for power in Southern California is growing rapidly because the population is rising and people are moving eastward to more affordable housing in the Inland Empire, where soaring temperatures in the summer mean big air conditioning bills.
Another factor is the broad boost that foreign trade is bringing to this region’s economy, which is creating new commercial and industrial facilities that need power.
Fortunately, the region’s major utilities appear ready to step up to the plate.
Edison is building a power plant in Redlands on a site left unfinished after the collapse of deregulation. And it is applying for regulatory approval to build a $630-million transmission line to bring surplus power from Arizona.
SDG&E; will have new capacity from a plant being built by Calpine Corp. in the Otay Mesa area of San Diego, and it is building a transmission line, in part to bring in power from renewable sources in the Imperial Valley.
So building is going forward and everything’s sunshine, right?
Well, “partly cloudy but clearing” would be a better description. Fresh opportunity could be squandered if Californians indulge their peculiar tendency to deny reality.
“In California, many people believe that conservation can take care of the state’s power needs, just as many believe that there never was any real shortage in the crisis four years ago,” says Lawrence Makovich, senior director of Cambridge Energy Research Associates, a New England-based consulting firm.
That’s the same California spirit, of course, that likes to use gasoline but opposes drilling for oil, or that demands clean-burning natural gas but fights against siting liquefied natural gas terminals in the state.
Such fantasy thinking can be a threat to the state’s economy. Recall, for example, the traditional rulings of the California Public Utility Commission that opposed transmission lines and allowed utilities to hold only minimal reserves of power. Lack of reserves exacerbated the energy crisis of 2001.
Today, attitudes have changed for the better at the PUC. The regulator is now demanding that utilities build reserves of 15% to 17% of base load needs as insurance against brownouts. And criteria for approving transmission lines and other capital projects are on a faster and more economical basis.
Still, four years after disaster, issues of regulation and deregulation are not completely settled, such as whether big commercial customers can buy power from independent producers, abandoning the regulated utility and thus forcing it to hike rates to its remaining customers.
Pedro Pizarro, senior vice president for power procurement at Edison, fears that rules will change in midstream, as they have before, and that regulators will force his company to serve non-Edison customers at lower rates than it thinks warranted.
No denying that these are knotty issues and they will be argued for a long time, including in a ballot initiative this November brought by the Utility Reform Network, a consumer-oriented law group that is calling for a return to traditional regulation to stabilize the electricity marketplace.
So what’s the bottom line? The lights and air conditioning will stay on this summer -- unless an unusual heat wave combines with wildfires to make severe demands on the system, says James Bushnell of the Haas School of Business at UC Berkeley, an advisor to the state’s energy agency.
Additional capacity will be needed for 2006, and it looks like we’ll get it. Once again, the economic and population growth of Southern California is an opportunity. It is why we see investment coming into the region, building homes and commercial structures. In such an environment, political argument about forms of utility regulation should take a back seat to the technical need to deliver the power. The idea should be as simple as a lightbulb going on.
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James Flanigan can be reached at jim.flanigan@ latimes.com.
