Electricity Supply Outlook Dims in ‘04

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Oct. 24, 2003 Share this on FacebookTweet thisEmail this to a friend

As the legendary New York Yankees catcher Yogi Berra once said, “It's de ja vu all over again.”

While electricity may have moved off the front page since 2001, the supply-demand imbalance that caused the energy crisis is looming again. And according to a recent study by the California Independent System Operator, the agency responsible for ensuring the reliability of the electric grid, it may happen sooner than anticipated.

The just released ISO Five Year Assessment (2004-2008) forecasts adequate capacity to meet demand under baseload conditions through 2008. However, reserve shortages are forecasted as soon as the summer of 2004 under a combination of adverse conditions, including more robust-than-anticipated economic growth, higher than average temperatures, reduced hydroelectric output and additional power plant retirements.

For some time the conventional wisdom has been that electricity supply may fall short in the summer of 2005 under adverse conditions such as those mentioned above. ISO's new forecast is likely to energize the debate in Sacramento and at the California Public Utilities Commission as to what needs to be done to encourage the construction of new generation facilities in this state to meet future demand.

Since the 2001 crisis, nearly all of the new power plants slated for construction have been postponed or canceled due to a combination of factors: low wholesale electricity prices, the Enron scandal, regulatory uncertainty and reluctance by Wall Street to finance new electricity generation projects.

Hopefully California's economy will recover soon and manufacturing will pick up again, but none of this will happen if the state doesn't have enough electricity to power this production and growth. Stabilizing the electricity market and bringing more power online is a task as important as any facing California today.
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