California DWR purchases total 15 million Mw-hr

By the OGJ Online Staff

HOUSTON, June 15 -- The California Department of Water Resources said it spent $3.9 billion on electricity during the first 5 months of this year, in a report released Friday, but the agency said average power prices have been falling since January.

The cost includes all power purchases, including spot and contract energy, as well as what the DWR paid for balance of month, and estimates for ancillary, transmission, and dispatch costs. Recently, the agency said it purchased more energy on "balance of the month," monthly, and quarterly contracts, helping reduce its exposure to the day-ahead and intraday markets, but it did not break out contract prices vs. short-term and daily prices.

According to the report, the agency purchased 15.1 million Mw-hr between January and May 2001 to make up the net short not provided by the state's utilities. The net short energy requirements represent the difference between how much the investor-owned utilities can produce from their own generation and demand by their customers.

The numbers have been rising steadily since January, when the DWR purchased 1.7 million Mw-hr. The agency purchased 4.7 million Mw-hr in February, 6.9 million Mw-hr in March, 6.9 million Mw-hr in April, and 8.2 million Mw-hr in May.

Average wholesale electricity prices have fallen about 30% since January to a still high $243/Mw-hr in April. Some recent transactions in the West have been reported as low as $30/Mw-hr, and DWR officials have been quoted saying they may seek to renegotiate terms of contracts which have not been executed.

Since the DWR began buying electricity after Southern California Edison Co., Rosemead, Calif., and Pacific Gas & Electric Co., San Francisco, ran up billions of dollars in unpaid wholesale power costs, they have repaid the state $239.6 million.

The agency said based on contracts signed to date, there is no need for additional 24-hr base load contracts after 2001, with the possible exception for a small amount needed to serve northern California on the Path 15 constraint.

In that area, DWR said it is still seeking some limited summer resources for 2001 and 2002. The agency said it may still consider "reasonably priced" peaking generation for delivery starting in May 2002, depending on the final disposition of contracts now under negotiation.

Separately, DWR, the Bonneville Power Administration, and the California Independent System Operator reported reaching an agreement under which they will exchange power during electric emergencies this summer.

"The principles on which the plan is based,'" said Steve Wright, BPA's acting administrator, "will ensure that all transactions will benefit both the Pacific Northwest and California, and that reliability problems will not be shifted from one region to the other. This agreement protects and benefits the Northwest while helping California when it is possible."

The exchange ratios and the timing of the returns will be mutually agreed upon at the time of the transaction. Instead of the fixed 2-to-1 exchange ratios BPA and California used earlier this year, the ratios will depend on market conditions, the shape of BPA's system, and the nature of the request, BPA said. The exchange energy would be returned to BPA in 24 hr, in 7 days, or next fall depending on BPA's energy needs.

BPA and California officials said they will continue discussions to arrive at a contingency plan that would determine the conditions under which California may be able to help the Northwest in the event of energy shortages during the winter when Northwest energy usage is at its highest.