Union Tribune

April 9, 2003

New power crisis could hit state, ISO official says

By TOBY ECKERT
COPLEY NEWS SERVICE

WASHINGTON California could face another electricity crunch in the next year or two if the economy rebounds and the construction of new power plants continues to lag, the head of a state power management agency said yesterday.

Energy consumption has been dampened by the weak economy, but could surge if business conditions improve, said Terry Winter, president and chief executive of the California Independent System Operator, or ISO, which manages the state's power grid.

"If our economy turns around, especially with the activities we have in Silicon Valley where so many (companies) have reduced their consumption, they can add that back in literally months. And then I think we're going to very quickly get into a concern," Winter said.

"My feeling is we need more generation, but even more than that, we need some transmission" infrastructure, he said.

Winter made his comments at a House subcommittee hearing on California's energy market. Officials with California's largest utility and power producer groups echoed his concerns, saying energy investments in the state were continuing to lag because of market uncertainty.

Winter acknowledged that "forecasting load is not a real science" and that other factors, including the weather, will influence electricity consumption and production.

"My guess is if things go normal, the economy doesn't rapidly recover, we're probably good till 2006, 2007," Winter said.

The subcommittee chairman, Rep. Doug Ose, R-Sacramento, expressed impatience with the pace of the ISO's implementation of a new operating plan for the California market. Several elements have been delayed.

The plan is designed to ensure the state has adequate power supplies and is less vulnerable to the type of price manipulation that occurred during the 2000-01 power crisis.

Ose contends the state is vulnerable to a repeat of the crisis, when wholesale electricity prices surged, causing shortages and scattered blackouts.

"This process must go forward; it must," Ose said. "California cannot continue to live in an energy purgatory. The state's economy is soft, and energy prices are low. But this will not continue forever."

Karen Tomcala, vice president of regulatory relations for California's largest utility, Pacific Gas & Electric, also warned of "projections of supply shortage recurrence in the 2007-2008 time frame."

"Implementing stable rules on which investors can rely can reverse this trend and ensure fully adequate resources," she told the subcommittee in prepared testimony.

Winter said the ISO plans to file an updated market design proposal with the Federal Energy Regulatory Commission "within the next several months."