San Diego Business Journal

California may have made it through the summer of 2001 without any rolling blackouts, but that doesn't mean the energy crisis is over. Other problems are waiting in the wings.

So said the president and chief executive officer of the California Independent System Operator, the agency that oversees the purchase and transmission of energy by the state's investor-owned utilities. Terry Winters spoke Nov. 5 in San Diego at an event sponsored by Atlanta-based CES International, which makes software for the utility industry. Although California made it through the summer of 2001 without facing blackouts, Winters said the state currently has projected reserves of only 1.3 percent of its energy needs. A service region needs reserves of at least 14 percent to have a reliable system, Winters said.

Though there are a projected 38,000 new megawatts of electricity from proposed new power plants that may be built throughout the state, Winters pointed out that almost all of that new generation will rely on one fuel source , natural gas , and the infrastructure for all those new natural gas-fueled plants isn't there.

"Do we have a natural gas system that will support those additions? Absolutely not. Do I think it's all going to be built? Absolutely not."

Compounding matters is the increased demand for natural gas as its use expands in many surrounding states. In the last decade, Oregon's population grew by 20 percent, while its natural gas consumption increased by 112 percent. In Nevada, a 66 percent increase in population led to a 184 percent jump in natural gas use in the same time period.

Similarly, there are bottlenecks in the transmission of electricity from one area of the state to the other. "Path 15" , the major connection between northern and southern parts of state, is inadequate.

That makes it more difficult to move electricity from the power plants to where it's needed most, especially when hydroelectric power from the Pacific Northwest isn't available.

"We will have outages in Northern California again. We will have bad hydro years," he said. "We're going to be in a lot of trouble again."

Also, much of the energy generation within the state comes from power plants that are more than 34 years old. And units that old begin to have maintenance problems, he said.

Of the energy challenges facing California, Winters said only one has gotten any attention , the efforts by Gov. Gray Davis to renegotiate the state's long-term contracts.

Currently, these contracts , set up when the cost of electricity was much higher , now average between $65 and $138 per kilowatt hour over a period as long as 20 years. That works out to a $43 billion commitment at a time when the cost of electricity has fallen to about $30 on the spot market, he said.

"That is a tremendous burden to dump onto our children, and it's something we'll need to do something about," Winters said.

In general, Winters supported Davis' efforts to renegotiate the contracts. However, he pointed out that the generators have taken a hard line, and it remains to be seen whether these efforts will get anywhere.