California governor to get generation authority?

Short supply and high demand have prompted some Californians to call for giving Gov. Gray Davis authority to fast-track new generating capacity when the California Legislature convenes Aug. 7.Though controversial and unlikely to win much support, observers say, it is one of the many solutions under discussion to resolve an electricity crisis that has dogged the state since May.


Short supply and high demand have prompted some Californians to call for giving Gov. Gray Davis authority to fast-track new generating capacity when the California Legislature convenes Aug. 7. Though controversial and unlikely to win much support, observers say, it is one of the many solutions under discussion to resolve an electricity crisis that has dogged the state since May.

High usage and rising temperatures have forced the California Independent System Operator to initiate power alerts calling for conservation in May, June, and July this summer. State Sen. Dede Alpert (D-San Diego) has called for an investigation into the price spikes, including whether there was profiteering, and a price freeze for San Diego Gas & Electric Co. (SDG&E) customers.

"She is hoping to find a solution without scrapping deregulation," says an aide.

Sen. Steve Peace(D-El Cajon) is also calling for hearings into whether it is necessary to reregulate the industry, says a spokesman. California pioneered electricity deregulation.

Merchant power generators say the underlying problem in the California power market is that the state has experienced increased demand for electricity from rapid economic growth and unseasonably hot weather recently. Yet little new generation is expected to be operational before the summer of 2002.

Presently, the California Energy Commission is responsible for approving new generation facilities, but it often bows to opposition from local jurisdictions. As a result, very little new generation has been approved for construction in the state in the past decade.

These conditions have led to volatile wholesale electricity prices and price spikes in the hundreds of dollars, according to independent power companies. Merchant companies such as Houston's Dynegy Inc. say reregulation is not the answer.

"If they consider reregulation, it is something Dynegy would have to look at," a spokesman says. "But it is way to early to say either way [what the company would do]."

The real solution is to reduce regulations which stretch the time to complete a project to 3-5 years, compared to under 2 years in other parts of the country, he says.

In a letter to the California Public Utilities Commission, Alpert said the commission should commence an investigation into whether SDG&E acted prudently to anticipate potential peak energy demand and purchased electricity for future delivery at reasonable prices in advance of demand in order to keep costs affordable to its customers.

"There is a significant question whether San Diego took steps to avoid this problem," says Alpert's aide. As for new generation, he says, who could have foreseen no new generation would be available when the market was deregulated and utilities began selling off existing generation to merchant energy companies.

The issue is winning new visibility. Federal Reserve Board Chairman Alan Greenspan told the US Congress Thursday he is concerned disincentives to build new power plants could destabilize the US economy.

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