It's official, the Governor has no clothes...

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 05/09/2001 09:53 AM -----

	"smara" <smara@enron.com>
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	05/09/2001 09:48 AM
		 
		 To: "smara" <smara@enron.com>
		 cc: 
		 Subject: SF Gate: It's bad, and it'll get worse/TROUBLE AHEAD: Extra power 
for summer will fall well short of Gov. Davis' promise


 
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This article was sent to you by someone who found it on SF Gate.
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http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/09/MN197841.DTL
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Wednesday, May 9, 2001 (SF Chronicle)
It's bad, and it'll get worse/TROUBLE AHEAD: Extra power for summer will fall 
well short of Gov. Davis' promise
Carolyn Said, Chronicle Staff Writer


   California will get only one-third of the new power that Gov. Gray Davis
promised to deliver by July 1, virtually ensuring a brutal summer of
blackouts for the energy-strapped state.
   Davis had pledged to take emergency measures to get 5,000 extra megawatts
up and running by summer. Instead, the state will have 1,698 megawatts of
the promised new power by July 1, according to the California Energy
Commission. Even by Sept. 1, California will have added just 3,669
megawatts.
   The goal of 5,000 megawatts -- enough to power 5 million homes -- was
crucial because it represents the gap between expected supply and demand
this summer.
   "We're still hopeful we can get as many megawatts online this summer as
possible," said Davis spokesman Roger Salazar. "But we understand there
are issues involved in the siting and construction of new power plants."
   In fact, experts said, there are so many obstacles that the governor's
plan was unrealistic to begin with.
   "There are limits to what you can reasonably accomplish," said Arthur
O'Donnell, editor and associate publisher of the California Energy Markets
newsletter.
   Without a way to plug the gap between supply and demand, California can
expect a long, dark summer.
   "Any warm day from May to October -- it doesn't even have to be abnormally
warm -- California is going to be at risk for blackouts," said Michael
Zenker, director of Cambridge Energy Research Associates, an energy and
economics consulting firm based in California.
   He predicts that rolling blackouts in the state this summer will be "in
the hundreds of hours. I expect Californians will grow pretty weary of
them pretty quickly."
   The California Independent System Operator, which oversees about 85
percent of the state's straining grid, has said that anytime its load hits
40,000 megawatts or above, California will be at risk of involuntary
outages. Last summer, that mark was reached on 34 days.
   Whether this summer will exceed that number of days or not depends heavily
on the weather. If it's a cool summer, California might squeak by with
relatively low power demand and fewer blackouts. If the mercury rises,
electricity use will soar as people crank up their air conditioners, and
the lights will go off for tens of thousands of customers at a time.
   This week's warm temperatures and concurrent rolling blackouts are a clear
harbinger of a pattern expected all summer. Although power plants that
were offline for maintenance aggravated the situation, the week's two
blackouts "tend to indicate that the blackouts we'll have as we get
further into the summer will be deeper and more sustained," said Zenker.
   Exacerbating the state's inability to generate enough homegrown power is
the situation in the Pacific Northwest, where drought conditions are
severely curtailing hydroelectric production, meaning that California
cannot count on imports this summer.
   The state's next best hope for coping with the warm weather will be
enticing consumers and businesses to raise their thermostats, shut off
their lights and shift their heavy usage to "off-peak" hours.
   "To avoid blackouts in California, we're going to need conservation," said
Jim McIntosh, director of operations for the ISO.
   Cutting consumption by 10 percent could get 5,000 megawatts off the grid,
according to Davis. And the Energy Commission says that various measures
enacted last September, such as incentives for businesses to paint their
roofs white (reducing their air-conditioning needs), will save 281
megawatts by June 1 and 334 megawatts by August. The governor's latest,
$800 million campaign to encourage conservation could save an additional
2,061 megawatts by summer's end.
   But energy experts say Davis may be overly rosy in his projections for
cuts in home consumption.
   That's because the expected rate increases for electricity won't hit until
June, so customers would first see a spike in their bills in July.
Psychologically, many people will start serious conservation measures only
once they've taken a hit in their pocketbooks.
   Although Californians have already cut back enough to save 2,866 megawatts
during April, "I don't think more (conservation) will happen," said
Michael Shames, head of the Utility Consumers Action Network. "Markets
move slowly when it comes to changing energy conservation patterns."
   Davis's ambitious building plan took several routes to add up to 5,000
megawatts. In part, it relied on three huge power plants -- Los Medanos,
Sutter and Sunrise -- that had already been under construction for years
and are certain to come online this summer. But much of it was based on
getting dozens of small energy providers to either increase output or
build new facilities. Those efforts foundered on several issues:
   -- QFs: Davis was counting on getting dozens of so-called "qualifying
facilities" -- or QFs, basically small alternative energy generators -- to
ramp up production. That, plus restarting of two existing power plants,
would have added 1,244 megawatts. Instead, most QFs will produce only the
bare minimum, and one of the power plants may not be restarted.
   The QFs, which are paid directly by California's utilities, are still owed
millions of dollars for power they produced in December and January. And a
new payment scheme enacted by the California Public Utilities Commission
will slash payments for power they generate in the future. QFs say they
will actually lose money if they run full tilt because they can't recoup
their natural-gas costs.
   -- Peakers: Small, temporary power plants called peakers accounted for 2,
133 megawatts of Davis's plan. Although the Energy Commission sped up
licensing for peakers, many firms were competing for scarce resources to
get the mini power plants built.
   "There's an internal competition (among power firms) for transmission
interconnections, for natural-gas pipeline space, for turbine parts,"
O'Donnell said. "I felt a fairly large amount of optimism was built into
(the peaker plan) to begin with."

   E-mail Carolyn Said at csaid@sfchronicle.com. Coming up short
   How much more power Gov. Davis pledged to bring online by July 1:
   5,000 megawatts
   How much more power the state actually will have by July 1:
   1,698 megawatts
   How much the state will add by Sept. 1
   3,669 megawatts.
.
   Projections and reality: New power in California
   Gov. Gray Davis pledged to get 5,000 megawatts - the expected gap between 
demand and production - of new power generation online in California this 
summer, but only 1,698 megawatts will be ready by July 1, with 3,669 
megawatts 
expected by Sept. 1.

   Date online: July 1, 2001
Los Medanos Energy Center, Pittsburg: 559mw
Sutter Power Project, Yuba City:      500mw
SMUD McLellan upgrade:                 22mw
Renewable energy projects:             80mw
LADWP Harbor- Valley:                 267mw
   Date online: Aug. 1, 2001
Sunrise Power Project, Derby Acres:   320mw
Restarts(x):                          450mw
                                     -794mw
                                    1,224mw
                                    1,397
                                    megawatts 
                                    shortfall
Peaker plants:                        270mw 7/01
                                      572mw 8/01
                                      629mw 9/01
                                     -662mw(y)
                                    2,133mw

   (x) Restarts, rerates of existing thermal and renewables
   (y) Some additional megawatts may come online through small peakers being 
licensed by the California Independent System Operator.
.
 -- Total new power plants (in megawatts)
   3,669mw expected
   5,066mw projected

   Chronicle Graphic
   Source: California Energy Commission


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Copyright 2001 SF Chronicle