Unlike 2001, California begins New Year awash in electric power

HOUSTON, Dec. 31 -- In a reversal of fortune, the California Independent System Operator is awash in power, compared to last winter's bleak periods of shortages.

This time last year, the state's grid operator struggled hour by hour to keep California lights burning as the state sank into an electricity crisis riddled with shortages, spiking prices, and bankrupt or near bankrupt utilities.

Last winter, chief ISO scheduler Tracey Bibb was desperate to find 4,000-6,000 Mw on an hourly basis to meet state electricity demand.

"This year, I only have to come up with a couple of hundred megawatts in real time," Bibb said. "The key is we have excess generation with few power plant outages and electricity imports are running ahead."

The California ISO says new power plants and fewer outages, more imports, and long-term contracts have helped correct the nation's most dysfunctional energy market.

Gregg Fishman, spokesman for the California ISO, said, "Last winter's crisis resulted from a coincidence of factors, a bad hydroelectric [generation] year, huge economic demand for electricity, no new power plants on line, and a natural gas price spike. Take away one of those factors and the crisis would have been much less acute."

Electricity producers in neighboring states are now eager to sell to California. Last winter, the US Energy Secretary had to force them to sell the state power.

Fishman said, "We see a lot of power being offered into the market now. They have better expectations of getting paid."

Last year the state's utilities were teetering on the edge of bankruptcy and had stopped paying for power. The state intervened and began buying electricity for the utilities. But the legislature did not authorize the expenditures until much later, creating doubts about payment and making generators reluctant to sell power.

This winter, gas prices are 50% lower, allowing marginally efficient generators to add to electricity supplies. More generation has come on line too: California added 2,231 Mw of capacity this year, according to ISO documents.

However, imports give the ISO's Bibb the most comfort. California historically has relied on its neighbors to help it through times of peak demand.

"We are getting 1,000-2,000 Mw more an hour than we got last year in imports," said Bibb. "Even better, it's showing up in the day-ahead market instead of the real-time market."

The end of the drought in the Pacific Northwest has helped greatly. Ed Mosey, spokesman for the Bonneville Power Administration, a federal power agency that controls about 11,000 Mw of mostly hydroelectric power in the Pacific Northwest, said, "The drought is over. We have an average or better snow pack throughout the Cascades."

During California's shortages a year ago, electricity from the Northwest was scarce too. This winter, partly because of lower regional demand, the Pacific Northwest has excess power to send to California.

Bibb said demand isn't falling in California. Peak demand in January 2002 is forecast to be 63 Mw higher than last year.

"There's just a lot of generation on line this year," he said. "Last year we faced 10,000-14,000 Mw offline a day. This year not more than 7,000 Mw is offline."

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