The California Energy Commission released on January 28 its prediction for energy supplies and demand for the next five years. It predicts the state should have a 9% operating reserve in 2003 during the critical months of July, August and September under extremely hot conditions and a 16% reserve with cooler conditions. Reserve margins start to decline in the outer years, and by 2008 they are at 8.8% under normal conditions and 3% under hot conditions. The agency makes minimal predictions for new supplies coming on-line in these outer years and minimal plant retirements.

Since 2000, 18 new power plants have been licensed and constructed, adding over 4,980 MW to the grid. By this coming August, seven additional plants totaling 3,106 MW will begin operation. Supply has also outpaced demand in the Southwest and Northwest over the past two years, by about 8,000 MW, the CEC concluded.

The CEC noted that the contracts signed by the California Department of Water Resources in 2001 have ensured that there will be sufficient capacity to meet loads. These numbers confirm why the California utilities signed a minimum number of contracts this winter. But for the most part they are five year contracts, while the CDWR contracts are for nine or 10 years. The CEC report can be found on its website at www.energy.ca.gov/electricity.

In another report that shatters California Governor Gray Davis's myth-making that Enron was the 800-pound gorilla of the state's Energy Crisis, the California Independent System Operator released to the public in mid-January a report that looks at the revenues participants in the ISO earned using the trading practices identified in the now famous Enron memo as "Fat Boy," "Death Star," "Get Shorty," and "Ricochet," among others.

The report had originally been prepared and submitted to the Federal Energy Regulatory Commission in October 2002 for use in its investigation of western markets. The impression left after reading it is that many participants were gaming the system, including utilities, taking advantage of loopholes in the tariffs. The Enron memo writers were simply describing industry-wide practices.

Of the $90.5 million in congestion and other revenues earned by up to 33 generators, scheduling coordinators and utilities using the trading practices, Enron earned 26%, or about $24 million. None of the trading strategies were overtly illegal at the time. The ISO already has or will be rewriting tariffs to discourage gaming.

The trading practices described ranged from overscheduling load (Fat Boy), exporting power out-of-state, using circular schedules (Death Star), shifting loads to create congestion then getting paid to relieve congestion, selling back ancillary services (Get Shorty), scheduling of counterflows on out-of-service lines (Wheel-Out), megawatt laundering (Ricochet), selling non-firm energy as firm energy and scheduling energy to collect congestion charges.

The ISO report discusses the trading strategies in detail and, unfortunately, there is not enough room to discuss them in this column. The reader is referred to the ISO's website, www.caiso.com, where a link to the report can be found on its home page.

As this column was being completed, Reliant Resources announced it had signed a settlement with FERC and will pay $13.8 million for limiting the amount of power it offered to the California Power Exchange for delivery on June 21 and 22, 2000. Reliant traders were responsible for the action and when the company discovered it as part of its review of past trading practices in California, it brought it to FERC's attention, according to a statement released by Reliant.

While California state executives are no doubt gloating over the settlement, Reliant hastened to point out the actions were not in violation of laws, tariffs or regulations in effect at the time. Furthermore, there was no supply shortage during that period, no ISO-declared emergency, no blackouts and the two days fell during a low-price week on the market.

Reliant owns 3,834 MW in Los Angeles and Ventura Counties that it acquired from SCE in 1998.

Interim Contracts Signed

California's three major utilities have signed their interim power contracts to fill supply gaps left by the California Dept. of Water Resources contracts turned over to the utilities on January 1. However, we know little about the newly signed contracts since both Southern California Edison and Pacific Gas & Electric have declared them "market sensitive" and the California Public Utilities Commission is honoring their requests for confidentiality. However, we are learning of a few contracts as individual companies announce them.

For example, Calpine will be selling 110 MW of on-peak and 55 MW of off-peak geothermal power to PG&E under a five-year contract and it predicts revenues will amount to approximately $40 million over that period. The geothermal power will come from Calpine's plants at The Geysers in northern California.
Black Hills Corp. announced in mid-January it is selling SCE 100 MW of capacity and peak power for the June through October peaking periods for the next five years. San Diego Gas & Electric did have the courage to publicly announce it was buying 236.7 MW of renewable power. Wheelabrator Shasta Energy Co. confirmed it was awarded one of PG&E's renewable contracts