California Bracing for Big Losses On Surplus Power

Far from its recent crisis of having too little power, California's commitment to purchase electricity could leave it with a surplus so large that consumers could pay up to $3.9 billion for unneeded electricity, a state analysis has found (AP/Houston Chronicle, Nov. 24).

The Department of Water Resources analysis compared the state's purchasing commitments under long-term power contracts negotiated earlier this year against estimates of electricity demand and market costs through 2010. It found that power purchased by the state at an average price of $75 per megawatt-hour is expected to sell for an average of $16 per megawatt-hour. Power surpluses are likely to reach their peak in 2004 and then decline through 2010.

Part of the reason for the new, larger surplus estimates is that many large industrial users have stopped buying power from utilities, turning to private energy companies instead. As a result, electricity demand is now expected to be about one-third what it was projected to be when the state contracts were signed. "We have essentially put ourselves in an energy straitjacket which will cost us billions of dollars over the next several years," said WIlliam B. Marcus, chief economist for JBS Energy (Los Angeles Times, Nov. 23).

Meanwhile, Californians are relishing the chance to string their holiday lights this year, after last year's energy crunch prompted state officials to call for a moratorium on festive light displays to conserve energy. "We understand it's going to be a very special holiday season, and we're not asking people to do without holiday lights," said Stephanie McCorkle, spokeswoman for the California Independent System Operator, which manages the state's power grid. But ISO will still encourage Californians to dim the lights during periods of peak demand, she added.

Holiday lights use about 1,000 megawatts of energy, about the same amount produced by a typical nuclear power plant (AP/New York Times, Nov. 23). -- AGR