California Crisis: Electricity's Future?

With power-supply problems in California making headlines-including stunning developments such as the meeting between the California Governor Gray Davis and Alan Greenspan, chairman of the Federal Reserve Board-the electric power marketplace is undergoing remarkable public scrutiny.

03/01/2001


 

With power-supply problems in California making headlines-including stunning developments such as the meeting between the California Governor Gray Davis and Alan Greenspan, chairman of the Federal Reserve Board-the electric power marketplace is undergoing remarkable public scrutiny.

 

As of this writing, two investor-owned utilities in the state-Southern California Edison and Pacific Gas & Electric-were approaching insolvency. They have imported power into the state and sold it at rates much below cost.

 

The California power crisis is unfolding rapidly. Rather than tracking quickly changing developments, what follows attempts to identify the far-reaching effects of the situation.

 

Companies unprepared. A survey by the Silicon Valley Manufacturing Group of its 190 member companies highlighted the fact that "Silicon Valley companies have a tremendous need for more electricity at a time of potential shortage, but lack the backup power to sustain their needs for the next two to three years." The report ran in the December 29 issue of the San Jose Mercury News .

 

While 75 percent of companies responding to the survey said they had backup generators, only one out of five said that backup power could satisfy their needs over the next couple of years, and nearly half of the respondents said they don't plan to install additional backup power generators.

 

Power price spikes. About 1,500 large users of power in the Inland Empire region of southern California have agreed to reduce their power use during statewide power alerts or pay heavy surcharges, reports The Business Press of Ontario, Calif. The surcharge imposed for using power during these alerts, as of mid-December, spiked rates from 7 cents per kilowatt-hours (kWh) to $7.20 per kWh.

 

There were 18 occasions last summer in which power reductions lasted from one to more than five hours. In December, Tamco Steel of Rancho Cucamonga, Calif.-one of the companies that agreed to the interruptible power rates-lost more than 15 hours of production in one week, the newspaper reported.

 

Landlord experiments. Los Angeles-based Arden Realty, which owns 142 properties, was already experimenting with power reliability before the state's December events. Victor J. Coleman, president of Arden, told the Los Angeles Times , "Our goals are, first, to install equipment that increases the reliability of power systems to our tenants, and second, to reduce the environmental impact of 'dirty' electrical generation."

 

Demand surges. The Silicon Valley city of Santa Clara had a peak load this summer of 450 megawatts (mW), according to a December 13 report on the Reuters newswire. "Officials say they have had requests for an additional 300 mW over the next two years alone."

 

Bucket brigade! When temperatures hit 109°F in San Jose on June 14, 2000-the hottest day in San Jose history-transformers were blown and rolling blackouts hit the San Francisco Bay Area. The result at SDL Inc.: "Frenzied managers suddenly found themselves in an odd bucket brigade, feeding diesel fuel into a backup generator five gallons at a time to protect several super-sophisticated devices. Without them, the optical equipment maker would have to close up for six months-and face a potential loss of $200 million in sales. As it was, the company suffered 'only' $3 million in losses," reports the Los Angeles Times .

 

Intel says no. The Toronto Star quotes Intel Corporation's CEO Craig Barrett: "Would I okay the expansion of anything in Silicon Valley right now? Not a chance. Will I bill my new facilities in Oregon and Arizona and New Mexico and Ireland, and even Hudson, Massachusetts, and Israel, where I can get an assured supply of power? Absolutely, yes, and that's where my expansion is going."

 

From Pure Power, Spring 2001

 



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