FW: Lead Story: Sunday SF Chronicle

Here's what those of us in San Francisco read Sunday morning, as the lead
story in the SF Chronicle:

< Soaring Electric Use More Fiction Than Fact
< Chronicle investigation finds power companies manipulate data to excuse
< their towering rates
< Christian Berthelsen, Scott Winokur, Chronicle Staff Writers
< <mailto:cberthelsen@sfchronicle.com<
< Sunday, March 11, 2001
< ,2001 San Francisco Chronicle </chronicle/info/copyright<
< URL:
< <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03
< /11/MN213155.DTL<
<
< Power companies say it so often, and with such certainty, that it has
< become a virtual mantra: "Skyrocketing" energy use by Californians is a
< root cause of the state's power crisis, and justification for surging
< electricity prices.
< But a computer analysis of electricity usage data by The Chronicle reveals
< that the mantra is a myth -- that overall growth in electricity demand
< hasn't been nearly as great as the industry portrays it.
< The industry has painted the summer of 2000 as the equivalent of a
< 100-year storm in meteorology -- an event so powerful and unexpected that
< the existing infrastructure was devastated by its force.
< The statistics show that 2000, taken in total, was nothing of the sort.
< Moreover, two independent state agencies' assessments of California's
< power plant capacity appear to show that the growth should have been
< easily accommodated.
< The companies have defended their practice of increasingly taking power-
< generation plants out of service by arguing that heavy demand and
< consequent plant usage necessitated major, time-consuming repairs.
< "The claims that demand growth is rampant and that it was totally
< unexpected and due to the Internet economy, to Silicon Valley, or server
< farms,
< or people recharging cell phones -- that's bogus," said Tom Kelly,
< assistant executive director of the California Energy Commission. "About
< as bogus as you can get."
< The Chronicle's findings are based on data collected by the California
< Independent System Operator, a manager of the state's electricity grid.
< They show:
< -- Total electricity consumption in California increased only 4.75 percent
< in 2000 from 1999, a sharp contrast to claims of industry representatives,
< who have repeatedly relied on isolated, loose or selective comparisons
< that make growth appear as high as 20 percent. In fact, the single
< greatest hour of electricity usage in 2000 was actually lower than any
< peak demand period in 1999 or 1998.
< -- Average peak demand -- the average of the highest hour of electricity
< usage for each day -- increased only 4.79 percent from 1999 to 2000. Even
< during the months of May to September in 2000, when the greatest spikes in
< electricity usage occur, demand growth was only 8.31 percent higher than
< the same period the year before.
< -- More than 30 days of critical power shortage warnings, so-called Stage
< 3 emergencies, and two days of blackouts this year occurred at times of
< moderate energy use -- levels often below those at which neither warnings
< nor blackouts have occurred in the past.
< The findings appear to buttress suspicions that the "skyrocketing demand"
< explanation for rising energy prices is a cover for what is really
< happening --
< that power companies have simply started charging more for an essential
< commodity, regardless of whether it is in short supply.
< Presented with The Chronicle's findings, Gary Ackerman, a representative
< for the Western Power Trading Forum, a trade group representing power
< companies, said the calculations support the industry position that
< electricity demand is growing strong.
< "That's pretty healthy growth for California as opposed to the long-term
< historical average, which is close to 2 percent," he said. "To me, that's
< really strong growth."
< Energy demand is certainly on the rise in California -- growth of more
< than 4 percent is still double what was projected -- and the state has
< obviously fallen behind in building power plants.
< Even though a recent study found California ranked 47th out of the 50
< states in per-capita energy consumption, the surging demand explanation
< has become so accepted that leading officials accept it as gospel. Gov.
< Gray Davis has made energy conservation -- 10 percent, at that -- a
< centerpiece of his efforts to solve the crisis.
< "Energy use is growing," said state Sen. John Burton, D-San Francisco,
< citing the growth of Silicon Valley and high-tech operations statewide.
< "There's been tremendous growth, whether manufacturing or high tech --
< cell phones, faxes, whatever. The stuff is growing."
< Yet the energy industry has been steadfast in its insistence that the
< consumer is largely to blame. In testimony and submissions to government
< bodies considering prescriptions for the crisis, energy demand growth has
< consistently been overstated.
< Joe Bob Perkins, the chief operating officer of Houston-based Reliant
< Energy Inc., told the U.S. Senate in January that California's growing
< economy and high summer temperatures caused electricity use to "surge
< dramatically" -- a demand growth of 13 percent.
< Richard Wheatley, a spokesman for Reliant, said Perkins' testimony was
< based on estimates by the federal Energy Information Administration of
< monthly retail electricity sales.
< "We do stand by that," Wheatley said. "Unfortunately, it does not track
< with ISO data."
< The industry-backed Edison Electric Institute said in a report that
< electricity demand grew by anywhere from 5 percent to 21 percent during
< the spring of 2000, compared with the same period a year earlier.
< Russell Tucker, an economist for the institute, said the group's figures
< were derived by identifying the single highest hour of electricity demand
< for each spring month of 1999 and 2000 and comparing them, finding the May
< peak rose 21 percent.
< Granted, the state Energy Commission uses the same model to determine
< whether California has enough plant capacity to meet demand. But the
< presentation makes it appear that overall demand, not just the absolute
< peak, is growing by 21 percent. When the peak of each day is averaged and
< compared from year to year, May's figure was much lower: 12.79 percent.
< Also, nowhere did Edison's report note that the peak hour of 2000, a load
< of 43,784 megawatts on Aug. 16, was actually lower than the peak hours of
< either of the previous two years -- 45,884 on July 12, 1999, or 44,406 on
< Sept.
< 1, 1998.
< The Chronicle analysis of average peak demand showed that no month last
< year grew more than June's 15.34 percent, though no blackouts occurred in
< that month. May and June were the only months when demand growth exceeded
< 10 percent, the analysis showed. Most months recorded 4 percent or 5
< percent, and some -- such as September -- were less than 3 percent.
< Two months, October and December, had demand levels lower than the year
< before -- 4.22 percent less for October, 1.46 percent lower for December.
< Mike Florio, a consumer lawyer and board member of the ISO, said that even
< growth of less than 5 percent from 1999 to 2000 would seem overstated,
< since 1999 was a relatively mild weather year and 2000 was a much hotter
< one. "You are quite right," Florio said. " 'Skyrocketing' demand is a
< myth."
< MARKET MANIPULATION?
< Consumer representatives and some politicians have long suspected that,
< rather than dire imbalances between supply and demand, market manipulation
< is behind the crisis.
< Generators and power marketers adamantly deny this, saying they have done
< everything they could to keep the lights on. They say they ran aging,
< decrepit plants at higher-than-normal levels last summer to accommodate
< what they described as unprecedented demand. They also say that, at great
< expense, they delayed much-needed maintenance in order to keep the power
< flowing.
< Their claims have received some support from the Federal Energy Regulatory
< Commission, which said in a report last month that it found no evidence
< power companies were using maintenance schedules to manipulate supply. The
< report, however, was heavily qualified by the FERC, which said it did not
< investigate other forms of manipulation. Moreover, the agency acknowledged
< that the bulk of its investigation was conducted by simply calling power
< plants and questioning them over the telephone.
< The supply side of the energy equation is harder to penetrate, in part
< because supply data are confidential. Thus, the question of how blackouts
< could have occurred at such low levels of demand in January is hard to
< answer. What is clear is that, at times, during the crisis this year, as
< much as 12, 000 megawatts of electricity supply have been unavailable for
< use, mostly because of unplanned plant outages -- about four times the
< level anticipated by the ISO.
< Power companies say the old plants they bought were not capable of
< producing to the levels sketched out by the ISO and the Energy Commission,
< and that everything from low water conditions, emissions limitations and
< high temperatures last year caused less energy to be available than was
< anticipated.
< But others suggest that what began as a shortage caused by a withholding
< of supply to drive up price has turned into one caused by withholdings out
< of fear of not being paid.
< What did go up, unquestionably, were wholesale electricity prices.
< While average electricity usage during the heaviest hours last year
< increased by less than 5 percent, prices charged by power companies to the
< utilities that deliver juice to consumers increased more than 289 percent.
<
< In June, the cost of a megawatt hour increased more than fivefold, going
< from the 1999 level of $30.53 to $170.60. In October, prices doubled over
< the same period a year earlier, going from $53.47 to $111.04. And in
< December -- despite a 1.46 percent decline in electricity usage from the
< previous December -- peak wholesale electricity prices hit $425.59. They'd
< been $31.88 one year before.
< Then the pace of price increases began to accelerate within the last six
< months of 2000. Overall, average peak usage during December was about
< 31,200 megawatts, about a fifth lower than it was in August. Average
< prices in December? They just about doubled, to $425 a megawatt hour.
< The companies' explanation for rising prices despite falling demand was
< that more and more plants had to be taken offline for repairs, decreasing
< supply. Even given the high number of inoperable plants, questions remain
< about why the existing supply could not cover demand.
< On the blackout days of Jan. 17 and 18 fewer plants were offline -- and
< more electricity was available -- than on days when the state managed to
< squeeze by without turning out the lights.
< Even today, with Stage 3 alerts having faded away, at least temporarily,
< demand levels remain more or less the same as when California was in a
< constant state of emergency. Moreover, the lists of offline plants are as
< long as ever.
< AMPLE POWER SHOULD EXIST
< The Energy Commission and the ISO have concluded that California's power
< plants are capable of generating more than 45,000 megawatts of
< electricity. That means that even with plant repair outages, low water
< levels decreasing hydraulic generation, air-pollution rules and other
< environmental constraints, the power companies should be able to
< accommodate all but the most extreme spikes in demand.
< According to industry data obtained by The Chronicle, the Western Systems
< Coordinating Council, a government-backed trade group in Salt Lake City,
< concluded California would have considerable surpluses throughout 2000,
< including margins as high as 39 percent in December, based on data
< provided to it by the ISO. Even under low water conditions, the ISO
< reported, the state would have total power resources of 47,532 megawatts
< in that month. Yet unplanned outages were far higher, and the system began
< to crash that month and into this year, at far lower levels of demand.
< "Clearly," Florio said, "we should not be having a shortage at 2 a.m. on
< Christmas Eve, when the only person awake is Santa Claus."
<
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