Sep 22 - Knight Ridder/Tribune Business News - Leslie Berkman The Press-Enterprise, Riverside, Calif.

Although Southern California needs more power plants to support its booming growth, it is uncertain how they will get built.

That uncertainty was underscored this week when Southern California Edison Co. cancelled its request for long-term electricity contracts that were expected to spur the development of 1,500 megawatts of new generation capacity.

The utility said late Tuesday it withdrew the contract request it had launched in April because the California Public Utilities Commission opposed Edison's controversial plan to spread the cost of the contracts to everyone in Southern California who depends on the same power grid for electricity.

Southern California Edison argued that because the new power plants would increase the reliability of the grid, everyone served by the grid should pay for the electricity through their rates.

San Diego Gas and Electric, municipal utilities in Riverside and Colton and independent power sellers were asked to help Edison pay for the plants.

However, the Public Utilities Commission said it is not interested in having Edison serve as a buyer of last resort for other utilities and energy service providers in Southern California.

The commission also said Edison has estimated that its own customers will need about 1,000 megawatts of the 1,500 megawatts of new generation that would be built under the proposed long-term contracts.

The commission won't know until it reviews the resource plans of utilities and energy service providers in January whether the additional 500 megawatts for which Edison wanted to contract will be needed, said commission spokeswoman Teri Prosper.

The commission advised Edison it could contract for 1,000 megawatts of electricity for its own customers, Prosper said. But Edison said it would no longer seek long-term contracts and would "continue to meet customers needs through short and medium term contracts," which generally do not support new power plant construction.

"We were attempting to help the state address a serious power supply dilemma -- inadequate new plant construction in Southern California," Southern California Edison Chief Executive Alan Fohrer said this week in announcing the withdrawal.

Pedro Pizarro, Edison's vice president of power procurement said in April that Edison's proposal was meant to share the financial risk of building new power plants. He said since the state's 2001 power crisis, power producers have not been able to obtain financing for new plants unless they have long-term contracts to sell the generation.

But Pizarro said Edison was unwilling to award long-term contracts because it was uncertain how many customers it would have in the future. The uncertainty, he said, stemmed from legislative efforts to allow more Edison customers to shop for power elsewhere.

Bob Finkelsein, executive director of The Utility Reform Network, a San Francisco-based consumer advocacy group, sympathized with Edison. He said as long as there is a threat of further deregulation, "Edison doesn't have sufficient certainty about who will remain their customers."

Finkelstein said because the commission had problems with Edison's approach, it would be up to the commission to find an alternative that will get power plants built.

Aaron Johnson, senior energy advisor to Commissioner Dian Grueneich, who issued the ruling on Edison's contracting proposal, said the commission has established a method for protecting utility investments in new generation by requiring any customers who leave their service to pay an exit fee.

Johnson said the method for protecting utility investments in power plants was first adopted when the PUC approved Edison's plans for building the 1,054-megawatt Mountainview power plant under development in Redlands, which is expected to begin operation next year.

Jan Smutny-Jones, executive director of the Independent Energy Producers Association, said Southern California's demand for electricity grew by more than 5 percent last year, more than twice the national average rate, because of a rebounding economy and expansion of development into inland regions with greater air conditioning requirements.

"The lion's share of load growth is in (Southern California) Edison territory," Smutny-Jones said.

 

State Energy Commission estimates California will require 5,000 megawatts of new electricity by 2016. One megawatt is enough energy for up to 1,000 homes.

 

Source: California Independent System Operator.