Did You Know

New Report Outlines the "Right Steps" for California Electricity Future

The Bay Area Economic Forum – in conjunction with the Bay Area Council and the Association of Bay Area Governments – has released a report addressing the serious electricity policy issues that have remained unresolved since the 2000-2001 energy crisis. The report, “Lightning Strikes Twice: California Faces the Real Risk of a Second Power Crisis,” maintains that California is still facing the risk of another electric power shortage, and that immediate steps must be taken to guarantee future electricity supply.

According to the report, generation capacity in California has scarcely improved since 2001 because of the lack of clear public policy backing new power plant investment. More than 28,000 megawatts (MW) of new capacity were announced for development following the 2000-01 crisis, “but a net increase of only 3,800 MW has been achieved, once retirements are taken into account,” the report stated. In addition, peak demand has continued to grow at 2.7 percent annually on average, amounting to more than 3,000 MW of demand growth.

Part of the current problem stems from the fact that California policy-makers have been slow to put in place clear and effective market rules and regulations. “Actions to resolve this near-term risk should be combined with, and consistent with, a set of long-term, sustainable rules for a new market design that will protect consumers, provide incentives for investors in new generation capacity, and encourage competition throughout the power system,” according to the report.

The report identified five key steps necessary to solve the energy challenges:

•The state must facilitate new generation construction before the summer of 2006;

•California must install universal time-of-use metering for all power users and encourage more extensive use of other load-management programs to encourage customers to cut demand during peak hours;

•There must be a speedy upgrade of transmission capacity;

•California must promote long-term infrastructure additions and put a capacity market in place, combined with a required reserve margin target for all energy service providers by 2006; and

•California should re-introduce consumer retail choice through a core/non-core market structure that will contribute to lower long-term power costs.

For more information, visit the Bay Area Economic Forum Web site at www.bayeconfor.org.