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California electricity prices to remain high

Saturday, September 30, 2000 By Kate Berry, The Orange County Register, Calif.

California's appetite for power mostly to fuel the new digital economy has risen dramatically so far this year, surpassing the expectations of energy experts, who see no end in sight to rising electricity prices. The power drain is an inevitable consequence of the growing high-tech economy, as businesses build the invisible infrastructure of the Internet.

Energy consumption in California is expected to grow 7.1 percent this year, up from 3.4 percent in 1999, according to Cambridge Energy Research Associates, an independent research firm in Cambridge, Mass.

That figure is triple the average growth in electricity demand for most of the past decade. In hot spots like Silicon Valley, demand growth has neared 10 percent in the past two years.

"It's pretty dramatic. We thought demand growth would be 2 percent to 3 percent this year," said Stephanie McCorkle, a spokeswoman for the California Independent System Operator, the state agency that manages 80 percent of the energy flowing through the electric grid. "We're still going to have this big gap between supply and demand."

Growing demand, fewer electricity imports and higher natural gas prices are among the factors that have contributed to a tripling of electric bills in San Diego and south Orange County this summer. These factors helped push the state to the brink of a power failure this month. But more important, each of these issues was virtually unknown and, experts say, unforeseen, when the state legislature passed deregulation unanimously in 1996.

"There's been a lot of finger-pointing going on in this market and missing from the equation is what really drove the tight supply," said Mike Zenker, director of the Western division at Cambridge Energy in Oakland, a group of well-regarded energy experts. "When deregulation was actively discussed, the West had excess capacity for electricity and demand growth was minimal."

The figures so far this year of the growth in demand for electricity underscore the need for better analysis to ensure that power plants are built to meet demand. The issue is among those being investigated by the Federal Energy Regulatory Commission, which is expected to act by Nov. 1 on how to fix the newly deregulated market.

"I don't think there was really a full appreciation of the fact that our electric supply would be so tight and constrained under deregulation," said Daniel Nix, deputy director for energy information and analysis at the California Energy Commission. "There were many people who had the view that the market would take care of supply." What a difference a few years makes.

Few experts anticipated the current economic expansion or rising natural gas prices and the effect they'd have on electricity prices.

-- Martin Thompson (, October 02, 2000


It seems that a game of stumble, fumble, and fall has been played out by California's polticians.

-- Chance (, October 02, 2000.

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