Power Reserves Deadline Changed to 06

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

Capitol Update, Nov. 4, 2004 Share this on FacebookTweet thisEmail this to a friend

By a 3-2 vote, the California Public Utilities Commission (CPUC) accelerated the deadline for investor-owned utilities (IOUs) to acquire electricity reserves to protect the grid from potential blackouts.

The IOUs must line up the extra supplies – 15 to 17 percent above expected need – by June 1, 2006, instead of the previous 2008 deadline.

"The next two summers are not going to be easy," said CPUC President Michael Peevey. "The sooner we lock up existing capacity in contracts, the more we can rest easy."

A spokesperson for Governor Arnold Schwarzenegger lauded the decision, saying it should bring "increased reliability for all California ratepayers." The Governor called on the CPUC to accelerate the deadline in a letter to Peevey written in April of this year.

While the state has avoided blackouts since the 2000-2001 electricity crisis, the potential for outages in the next few years looms on the horizon. Since the 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. According to a draft update to the California Energy Commission’s (CEC) 2003 Integrated Energy Policy Report, if a number of older power plants retire and additional resources don’t come on line before 2008, electricity reserve margins could become dangerously thin.

In light of the various warnings issued by the CEC and other industry experts, the CPUC’s efforts on resource adequacy and reserve margins are both timely and necessary. CMTA supports the CPUC’s resource adequacy goals as well as granting authority to the utilities to engage in forward contracting through a competitive procurement process (as provided in AB 57, Roderick Wright, D-So. Ctrl. Los Angeles, signed into law in 2002, Ch. 835). The CPUC is presently implementing AB 57, with several resource adequacy and procurement proceedings currently underway.
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