Union-Tribune Editorial


Energy crisis has just begun

December 11, 2000

With all the news out of Florida, Californians may have missed the fact that our energy crisis is worse than ever.

The state is on the verge of blackouts due to power shortages. Wholesale power prices are at an all-time high. While California has a $250 per megawatt price cap on power produced in the state, there are no caps on out-of-state power.

Since the state imports at least 20 percent of its power, utilities are paying enormous prices right now. On Friday, in anticipation of a cold front hitting the Northwest, trades for peak power hit $4,400 per megawatt in Northwest markets. With prices that high, out-of-state generators will sell to those markets, not to price-controlled California. There's a real possibility of blackouts this week.

The reason for the shortage? We simply don't have enough generating plants. What's more, too many plants in the state are shut down for maintenance.

Meanwhile, other plants have reached their air pollution quotas and can't operate. Before California allows blackouts, the state must suspend some pollution quotas and let the plants run.

Then, there's the unanswered question of whether power companies are gaming the system.

Dozens of new plants in the works will provide California with an additional 15,000 megawatts of power, about half of what the state uses today. But those plants won't be online for three to five years.

Consumers aren't feeling the pinch of current sky-high prices, though, because of the cost-defer-
ral plan enacted by the Legislature for San Diego County and continuing retail price regulation in the rest of the state. But utilities are paying exorbitant prices and not recovering those costs. That can't continue. Ratepayers will eventually have to pay, and the price tag could be far more than imagined.

More bad news: Regulators said that one answer was long-term power contracts between utilities and private power companies. That solution has all but vanished. Wholesale prices have gone so high, driven in part by spiraling natural gas prices, that long-term contracts no longer are viable.

Even more bad news: The Federal Energy Regulatory Commission is set to announce this week "soft" caps of $150 per megawatt, with energy companies allowed to exceed the caps by filing appeals. But FERC must institute firm, cost-based price caps throughout the West. Otherwise, out-of-state generators will sell power elsewhere, causing blackouts in the Golden State.

Now, some really scary news: FERC Commissioner Curt Hebert, who is expected to be appointed FERC chairman if George W. Bush is elected president, promised power industry leaders Thursday that he would end all price caps and remove state authority to regulate power markets. If that happens, Californians would be completely at the mercy of private power companies.

This energy crisis isn't over. It's just starting.

Copyright 2000 Union-Tribune Publishing Co.