Gentlemen,
Take a look at what is going on in California (this may or may not relate to 
how badly PG&E needs natural gas).  John

---------------------- Forwarded by John Shafer/OTS/Enron on 08/07/2000 01:40 
PM ---------------------------


Melody Floyd <mfloyd@INGAA.org> on 08/07/2000 08:05:23 AM
To: "Bill Kendrick (E-mail)" <bkendri@enron.com>, "Bruce Diamond (E-mail)" 
<bdiamon@columbiaenergygroup.com>, "Daniel L. Merz (E-mail)" 
<daniel.l.merz@williams.com>, "David Flaim (E-mail)" <davidfl@qstr.com>, 
"Dean Johnson (E-mail)" <johnda@wbip.com>, "Debbie Ristig (E-mail)" 
<dristig@reliantenergy.com>, "Don Holland (E-mail)" 
<dholland@reliantenergy.com>, "Donald Wishart (E-mail)" 
<don_wishart@transcanada.com>, "Ed Mize (E-mail)" <ed.d.mize@williams.com>, 
"Emilio de Cardenas (E-mail)" <edecardenas@duke-energy.com>, "Eric F. 
Estopinal (E-mail)" <efestopinal@cmsenergy.com>, "F. Jerry Kott (E-mail)" 
<fjkott@glgt.com>, "Gregory J. Odegard (E-mail)" <odegardg@epenergy.com>, 
"Henry Van (E-mail)" <HVan@enron.com>, "James Loesch (E-mail)" 
<loeschj@natfuel.com>, "James P. Easton (E-mail)" 
<james.easton@coastalcorp.com>, "Jeffrey Keeler (E-mail)" 
<jkeeler@enron.com>, "John Shafer (E-mail)" <JShafer@Enron.com>, "Khalid 
Muslih (E-mail)" <Khalid.Muslih@coastalcorp.com>, Lisa Beal 
<lbeal@INGAA.org>, "Michael L. Jablonske (E-mail)" 
<michael.l.jablonske@nspco.com>, "Mike Terraso (E-mail)" <mterras@enron.com>, 
"Phillip J. Murdock (E-mail)" <pmurdoc1@txu.com>, "Roland Gow (E-mail)" 
<RolandG@qstr.com>, "Ruth Jensen (E-mail)" <rjensen@enron.com>, "Sandra 
Barnett (E-mail)" <sandra_barnett@transcanada.com>, "Stephen M. Wilner 
(E-mail)" <swilner@columbiaenergygroup.com>, "Steven L. Burkett (E-mail)" 
<Steven_L_Burkett@dom.com>, "Terry D. Boss" <tboss@INGAA.org>, "Terry Doyle 
(E-mail)" <tdoyle@duke-energy.com>, "Tim Barnes (E-mail)" 
<Tim_Barnes@Iroquois.com>, "Tom Palmer (E-mail)" <tom.palmer@gt.pge.com>, 
"W.L. Beckman (E-mail)" <wlbeckman@cmsenergy.com>, "Warren Bird (E-mail)" 
<wbird@ceg.com>, "William Danchuk (E-mail)" <william_a._danchuk@dom.com>
cc:  

Subject: Saturday's LA Times on a new twist in the California power shorta ge 
story




This has very interesting implications for the industry..... 

-----Original Message----- 
From: Mary O'Driscoll/Perry Plumart 
To: tboss@ingaa.org; Lisa Beal 
Cc: Mary O'Driscoll 
Sent: 8/5/00 6:46 PM 
Subject: Saturday's LA Times on a new twist in the California power shortage 
story 

Pollution Rules Tighten Squeeze on Power Supply 


By NANCY VOGEL, Times Staff Writer 


???? SACRAMENTO--California's already severe electricity squeeze could 
tighten further this summer if regulators don't ease up on air pollution 
rules, power company officials said Friday. 
???? The state's 1,000 power plants--many aging and burning natural 
gas--have been running so hard and long in this summer of electricity 
scarcity that many are close to spewing as much pollution as they are 
allowed for the year under their permits. 
???? Without flexibility from air pollution regulators, the plants could 
be forced to shut down or face fines. This summer California cannot 
afford the loss of any of those plants at times of peak demand, said the 
state's last-resort buyer of electricity. 
???? "I can't tell you whether we are in big trouble or medium trouble," 
said Terry Winter, who oversees the nonprofit agency that buys 
last-minute supplies when electricity consumption spikes so high that it 
threatens to disrupt the state's high-voltage grid. 
???? "If it stays really hot and we've got to run every unit," said 
Winter, "then we've got a problem. If it cools off a little bit, we 
could turn off those units exceeding their permits and we won't have a 
problem at all. My sense is, by late August we'll be seeing the problem 
more severely. But we're working on it." 
???? Local and state air pollution regulators say they recognize the 
problem and will do their best to help avoid outages. 
???? "I was flying by the seat of my pants," said Richard Baldwin, head 
of the Ventura County Air Pollution Control District, who hurriedly 
struck a deal last week to keep a gas-fired turbine running on the 
Ventura County coast. The plant, which would have otherwise been shut 
down for the rest of the year because of air pollution rules, is owned 
by Houston-based Reliant Energy, one of the major players in 
California's recently deregulated electricity market. 
???? Under the deal, Reliant will pay the air district $4,000 for every 
hour it runs the relatively dirty plant the rest of the year. The money 
will go toward replacement of heavily polluting diesel engines. 
???? The agreement means that California's grid operators can now count 
on the plant to produce enough electricity to supply 125,000 homes. On a 
hot day in late July they desperately needed that electricity, but could 
not get it because Reliant's air pollution permit allowed 100 hours of 
operation each year and only five remained. 
???? "Those air quality districts could just throw up their hands and 
say no, not our problem," said Winter, executive director of the 
California Independent System Operator, the nonprofit entity that runs 
most of California's electric grid, "but they have all been very 
responsive." 
???? He said his Folsom-based staff foresaw the problem and has been 
talking with the U.S. Environmental Protection Agency, the California 
Air Resources Board and the local air districts that set pollution 
limits for individual power plants. 
???? "They have been very, very cooperative in trying to figure out ways 
to allow us to continue to generate but at the same time not add more 
pollutants to the air," he said. One way to do that, Winter said, may be 
to not run power plants in the evenings, when demand dips. 
???? "We don't want to put the lights out in the state," said Bill 
Kelly, spokesman for the South Coast Air Quality Management District, 
which issued a letter to power producers two weeks ago warning that many 
will soon bump against their air pollution limits. 
???? "We asked them, if they're going to be above their caps, to come in 
and work with us on compliance plans," Kelly said. "These plans would be 
developed through public hearings." 
???? What can be done will vary with every plant in the state, said V. 
John White, who sits on the Cal-ISO board and directs the Center for 
Energy Efficiency and Renewable Technologies in Sacramento. 
???? Air quality will not suffer significantly, White said, "with some 
creative application of rules and the principle that you've got to pay 
for the pollution somehow." 
???? The root of the current conflict between air pollution and energy 
production lies with California's failure in the last 10 years to build 
any major power plants. Demand for electricity in the state's humming 
economy has soared higher than anyone anticipated, while new supplies 
are not expected to reach the grid for at least a year. 
???? Several times this summer, grid operators have had to frantically 
purchase electricity elsewhere in the West to save the state from 
outages that can endanger lives and cost high-tech companies as much as 
$30 million a day in lost production. 
???? The shortage of electricity compromises air quality. When 
businesses voluntarily disconnect from the grid at times of highest 
demand, they often turn on diesel generators to maintain computer and 
phone systems. Such generators spew toxic air contaminants, particulates 
and higher levels of nitrogen oxides than most power plants. 
???? The tight supplies this summer also mean that California's old, 
inefficient power plants are running harder than ever and those built 
just for backup are running steadily. 
???? Duke Energy's power plant in Oakland helped keep lights on in the 
city after a disastrous 1989 earthquake. Typically, the costly plant 
operated 30 to 50 hours a year; its air pollution permit allows no more 
than 870 hours annually. So far this year, said Duke spokesman Tom 
Williams, the plant has run more than 500 hours. 
???? "The turbines date to late 1970s," he said. "They're being called 
on more and more." 
???? North Carolina-based Duke purchased or leased several major power 
plants from utilities such as Pacific Gas & Electric Co. and San Diego 
Gas & Electric after the Legislature deregulated the state's electricity 
market in 1996. 
???? One plant, in Chula Vista, generates enough electricity for 700,000 
homes in San Diego, where transmission problems leave the city 
especially vulnerable to power sags and surges. 
???? That plant is rapidly approaching its limit on nitrogen oxide 
pollutants, Williams said. "We're evaluating our options about how to 
address this problem." 



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