When the Power Goes Out

Exactly what happens when utility power supply becomes unreliable? It's a question that those in the power-reliability business have dealt with on a one-at-a-time basis. In the late 1990s, many of the answers were based on suppositions.Suddenly, however, a mega-case study has appeared: California.

By Joe Salimando, Project Editor June 1, 2001

Exactly what happens when utility power supply becomes unreliable? It’s a question that those in the power-reliability business have dealt with on a one-at-a-time basis. In the late 1990s, many of the answers were based on suppositions.

Suddenly, however, a mega-case study has appeared: California. Not only does the state rank as the world’s sixth largest economy, but it is also home to 2 million of the more than 17 million manufacturing jobs in the United States—double that of runners-up Ohio and Texas combined.

No one would deliberately set out to “test” power reliability and quality assumptions with a case study the scale of California’s recent epic events. But deregulation schemes that didn’t work and an undeclared freeze on power-plant construction going back to the early ’90s—utilities waited to build until deregulation’s details were finalized—has resulted in a power supply outpaced by the state’s booming population and business.

Energy experts are looking at the coming summer months with a sense of dread. One source predicts at least 20 high-heat hours over the summer, with the state’s power supply shortfall topping 5,000 megawatts.

What’s already happened, however, has put a lot of assumptions, strategies, tactics and equipment to the test. The following reports from the field—what has happened on the ground in California and elsewhere—can offer some perspective for power reliability customers, contractors and engineers.

Disrupting Businesses

“Shutting down our production lines would have a serious financial impact, so we have to talk to the power company every day,” said Bob Pfannkuch, president of Panasonic Disk Services of Torrance, Calif., in a report from Industry Week magazine. The company, which opened its plant in 1997, makes DVDs.

“It’s very inconvenient,” said Jude Hart, nursing supervisor at the Valley Convalescent Hospital in Watsonville, Calif. Hart told The Los Angeles Times that no one had given them any warning of a blackout. Even though critical functions were switched over to generators, “some parts of the hospital were without power for two hours.”

“When people are unable to connect to the Internet, we lose revenue,” explains Brad Jenkins, president of O1 Communications, a competitive local exchange carrier, in a recent report by the Sacramento Business Journal . Jenkin’s company has backup generators in eight of its 10 California locations.”

“At Arden Fair [in Sacramento], the problems led to shopping by flashlight and doors being shut,” reported The Sacramento Bee. Nearly 40 stores were shut down at the big shopping center on a Sunday afternoon last winter.

“We lost power at about 1:15 p.m. and there was absolutely no warning whatsoever,” said Kathleen Patterson, president of Central Valley Builders Supply in Saint Helena, Calif., as quoted in the National Home Center News . With no back-up power, staff wandered the 13,000-square-foot store with flashlights, to guide customers through the aisles and checkout lines. “Our sales staff was forced to complete all remaining transactions by hand.”

“All told, the company was off line for three vital hours,” reported The Industry Standard , covering the failure of a backup system for Sunnyvale, Calif.-based SonicWall. The Internet-security company’s Web site—and a bank of 500 computers—were down in February. As a result, the company must spend $150,000 on new batteries for an uninterruptible-power supply and a diesel generator.

A Killer Rate

“Our companies are going nuts,” Julie Puentes of the Orange County Business Council told The Orange County Register, after the utility Southern California Edison (SCE) ordered businesses there to shut down for up to 18 hours. The normal power-consumption reduction period for SCE’s “interruptible” power consumers is six hours.

Companies that are part of the interruptible-rate program pay heavy fines if they elect to consume power during an interruption. Conexant Systems, Newport Beach, Calif., told the Register that it would have fines of $1 million for January 2001 due to the program. “We really can’t continue like this as we move toward the summertime,” a company spokesperson said. Two days later, the same newspaper reported that Conexant, which makes microchips, “got hit with $2 million in penalties” for Wednesday, January 17. The normal rates for the 1,500 businesses in the SCE interruptible program are 3 cents per kilowatt-hour (kWh). During the penalty period, however, rates hit $9 per kWh.

The interruptible rates, moreover, are causing an entertainment shift. Los Alamitos Race Track, which hadn’t seen daytime racing since 1994, moved its race card from a 7:15 p.m. start to a 12:35 p.m. first post. “With our current price of electricity… it would put us out of business [to run at night],” a track official told the Register.

The April issue of the newsletter EEnergy Informer tells the story of a Westin Hotel in Long Beach, Calif. The Westin was on interruptible rates. Asked to cut usage for 16 hours in January, it could not comply. Instead, the hotel paid the going rate for electricity: $85,000 for the day, or $174 per room.

On-Site Power Gains

In response to these widespread business interruptions, legislation signed in early April by Gov. Gray Davis of California sought to push not just renewable energy, but distributed generation as well. One act provided $40 million to the state’s Department of Trade & Commerce for a loan-guarantee program. Homes and business would be able to obtain financial backing to buy and install generators. Additionally, a rebate fund of $30 million was created to help with distributed generation efforts.

Governor Davis has also signed Executive Order D-19-01 that imposes outdoor lighting restrictions.

The Tucson, Ariz.-based International Dark Sky Association, an organization of astronomers who want to tone down outdoor lighting at night, has jumped on the opportunity presented by the need for energy conservation. The association has actively supported the order.

In addition to the government moves, which had taken a backseat to other issues by early spring, services that never existed before in California are now springing up, offered by power marketers, power-quality providers and electrical contractors. For example, a “customer-specific electrical infrastructure analysis” is one new term never heard of until recently.

Another service provider is the electrical contractor. Cupertino Electric, a large Silicon Valley-based electrical contractor, promoted its power solutions for businesses on the same day as the bankruptcy filing of Pacific Gas & Electric (PG&E), the utility that serves northern California. The company performs a customer-specific electrical-infrastructure site analysis to determine the optimal technical approach for the client. On the basis of the analysis, appropriate equipment is installed, existing assets are maximized and a cost-effective migration path for both hardware and capital investment are enabled.

Others give more general advice. Bind Network Solutions, a San Francisco Bay Area technology consultant, is telling its customers that they need to have four hours of UPS battery backup, according to a report in the San Francisco Business Times. “That provides businesses with adequate time to ride out most blackouts, or to power down the servers safely in the face of a longer outage,” the newspaper explained. Jason Epstein, added: “All kinds of funky things can happen if [a server] crashes in the middle of writing.” What can happen? Data—including E-commerce transactions, payroll records and customer information—can be corrupted. Servers on occasion will not reboot.

Another issue stemming from the California outages is that real estate brokers are now being asked: “What grid will we be on?” Business owners want to know if they are on the same local service with police stations or hospitals, which would mean that they wouldn’t experience rolling blackouts along with the rest of an area. Real estate brokers are becoming uninterruptible-power experts, because clients want to know whether a property offers an uninterrupted power system.

New Opportunities

There are plenty of power marketers and suppliers who have jumped at the opportunities in California. For example, San Jose-based Calpine Corporation signed two long-term power contracts with the state. One of those contracts is valued at $5.2 billion. Calpine will sell the state 1,000 MW beginning in July 2001 and running through the rest of the year.

Other winners in the California power game are suppliers of photovoltaic systems. “From the first of the year on, it’s been nearly overwhelming for everyone in the industry,” Joe Morrissey, director of sales for Sacramento-based manufacturer Atlantis Energy told the Stockton, Calif. newspaper The Record. “Our entire existence has been in prediction of this happening. It’s wild.” The newspaper notes that even with a state subsidy for installations, a typical 2,000-watt solar system would cost roughly $12,000 to $18,000.

Another type of business that is attempting to cash in is the “location promoter,” who tries to persuade businesses to locate new facilities outside of California. The state reportedly has been swarming with these promoters. The Sacramento Business Journal reports that “the rolling power outages—and the nearly ongoing threat of them—has economic recruiters in other states licking their chops.”

Web-hosting facilities—major users of electricity—are looking out of state. They will go where the electricity is cheap. For example, Utah has 40-percent excess generating capacity and the lowest power rates in the country.

Crisis Response

For those that don’t move, conservation is just as critical as standby power. Seattle City Light, a municipal utility in the equally hard-hit Northwest, reported that its customers have saved 99,416 MW of power in the first quarter—enough to power 9,000 homes. The local chapter of the Building Owners and Managers Association and the Downtown Seattle Association were reportedly working with the utility to cut its load by 10 percent.

Some businesses have responded by cutting energy use. A hardware store in Bakersfield, Calif., for example, has lowered its thermostat from 72°F to 66°F, and turns on only half of the lights. All of the company’s 16 California locations are turning off parking and outdoor sign lights an hour earlier.

Power outages can cripple chip-making facilities and result in huge losses. In Salinas, Calif., semiconductor maker Integrated Device Technology (IDT) learned that one can be too responsive to the threat of rolling blackouts. When PG&E told IDT to expect power outages on a specific day, the company sent workers home and closed its plant for four hours, according to the Wall Street Journal. However, the power never went off on that day. A few days later, PG&E told IDT the power would disappear, and it did—two minutes later—stranding 250 silicon wafers in various stages of being transformed into semiconductors.

The Journal story suggests that what used to be considered a strength—the just-in-time, networked economy—is now hurting businesses. A planned blackout can be worked around, the newspaper reported, but “the randomness of it messes up their production schedule.”

D&H Manufacturing, Fremont, Calif., saw a $3,000 circuit board ruined on a production line because of an unannounced power loss. The damage could have been worse, owner Rich Wills told the Journal : “D&H makes parts that weigh several hundred pounds… A sudden loss of power could suck that part out of the machine and throw it at the door … People can get hurt.”

This summer, California embarks on its peak power-consumption season, for which all kinds of miseries are foretold. Steven Gilliland, senior vice president of asset management at Duke Energy North America observed in the March 26 issue of Restructuring Today: “This summer in California is going to be absolutely awful. I’m 50. In my entire lifetime, including the blackout in Manhattan in ’65, [I’ve seen nothing like what we are going to see] happen in California this summer—multiple times. Catastrophe types of things.”

From Pure Power, Summer 2001.

Northwest Aluminum Smelters: A Two-Year Shutdown?

What’s the cost of not being prepared for a power supply crisis? In the Pacific Northwest, some high-energy-consuming industries could face no revenue for several years.

The Bonneville Power Administration (BPA)—a federal agency that supplies power to the Northwest—is taking dramatic action. The BPA is seeking to extend shutdown of the region’s aluminum smelters for as long as two years, thereby saving power and avoiding an anticipated 250-percent increase in wholesale power rates in the fall.

Smelters in the Northwest had agreed to shut down until October 1. They have a BPA contract for about 1,500 MW effective October 1, but energy prices will be so high by then that it won’t make economic sense for the smelters to operate anyway. The BPA is willing to pay the companies something during the shutdown, but primarily the funding would be limited to helping them compensate idle employees.

In other words, under the BPA scheme, money that the aluminum companies had invested in a smelter would lie idle for a two-year period. Additionally, the companies would not be able to resell unused energy. Consequently, the facility would be a wasting asset—sitting idle, aging and producing no return on investment.

Officials at one company—Kaiser Aluminum—indicated that they are willing to consider the idea, but want interim compensation and BPA assurances that, later on, they can buy cheap federal power over the long term.

Advice for the Power-Shorn

What should a business executive do in the face of scheduled and unscheduled blackouts? Electrical contractors and consulting engineers should be ready to offer counsel to their clients in the business world. The following tips are helpful:

After a brownout or blackout. “Pull the plugs for sensitive equipment and turn switches to the off position. It is also a good idea in a business or office to turn off circuit breakers that serve the equipment…Once full power is restored, plug the equipment back in and turn switches and circuit breakers back on, but do so one piece at a time, starting with units closest to the power source to limit potential damage.”—from Hartford Steam Boiler Inspection and Insurance Company.

In the event of a brownout. “A work stoppage plan should be developed with management to determine what employees should do in the event of a temporary electricity curtailment…back up computers and don’t forget to frequently save work…Have flashlights and fresh batteries in all parts of the office, in particular those without external natural light sources…Keep in mind that building power outages will cause elevator shutdowns unless the building is supplied with emergency power generation.”—from “What If The Power Goes Off?” on the Building Owners and Managers Association Web site at:

In preparing for power problems, businesses should take into consideration that cordless phones will power down in an outage. If people are using cordless phones, they should make sure they also have hard-wired phones they can plug in.”—from a feature in the Washington (D.C.) Business Journal .

Leaving the “Golden State” Behind

One company that has been targeted by “location promoters”—who try to persuade businesses to locate new facilities outside of California—is Advanced Micro Devices (AMD) of Sunnyvale, Calif. Advanced reportedly needs to build a new 300-millimeter chip fabrication plant. “There are three logical places,” analyst Dean Freeman of Dataquest told the Austin, Texas Business Journal. One is Dresden [Germany], then Austin and the [San Francisco] Bay Area.” The Bay Area is unlikely because of the power problems.