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State loses $25 million in power plays, ploys
It sold some energy for loss, gave some away SF Gate News October 25, 2001 <http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/10/25/MN182788.DTL< Vote for public power no guarantee it will happen Two propositions on S.F. ballot SF Gate News October 25, 2001 <http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/10/25/MN24526.DTL< Power plant assessment to be taken over by state Dow Jones Interactive October 25, 2001 Ontario Electricity Market Inches Closer To Deregulation Dow Jones Interactive October 25, 2001 FERC to give states a role in RTO formation Dow Jones Interactive October 24, 2001 State loses $25 million in power plays, ploys It sold some energy for loss, gave some away Sacramento -- California sold electricity on a day it endured rolling blackouts and gave it away for free on another day earlier this year, according to documents that detail at least $25 million in power trading losses. The state Department of Water Resources, which has stepped in as the power buyer for troubled utilities, said yesterday that it sold 224,871 megawatt hours of electricity during the three-month period ending in June. That represents about 1 percent of the total traded during that period. Included were some sales for next to nothing -- or nothing at all. On May 26, the state sold 500 megawatt hours of power for 50 cents apiece to the Los Angeles Department of Water and Power. The state paid an average of $271 a megawatt hour during May. Two days later, the state gave away 786 megawatt hours of power to a British Columbia utility. "We may not have had a buyer," said Oscar Hidalgo, spokesman for the Department of Water Resources. "It's not a storable product." Giving the electricity away may have actually saved the state money, he said, because power grid rules can require buyers to pay a generator not to produce power if the system doesn't need it. Other Department of Water Resources records show that the state also sold power March 19, when 1.2 million customers statewide lost electricity in rolling blackouts for about 90 minutes. Officials said the fact that the state had to sell power that day was a reflection of how chaotic and fast-changing the electricity supply-and-demand situation was during the height of the energy crisis. State officials say it is normal for any energy-buying operation to have a surplus of electricity occasionally. Turning into a seller from time to time, they say, has helped the state to drive down prices and steadily lower monthly power-buying costs. But critics say the size of the losses is proof that the state locked in too much power at above-market rates in its early forays into the electricity- buying business. "I suspect that these (losses) are continuing and that they are continuing because (the Department of Water Resources) bought more power than we needed during the cool summer," said Assemblyman John Campbell, R-Irvine. Vote for public power no guarantee it will happen Two propositions on S.F. ballot If San Francisco voters decide Nov. 6 that a public agency is a better bet to provide cheaper, more reliable power than PG&E, it will be some time before the switch is flipped. Propositions F and I, which only set up the first steps toward public control, also face possible legal challenges from Pacific Gas and Electric Co. and other large utilities that have spent hundreds of thousands of dollars campaigning against the measures. There is also uncertainty about the costs. Neither measure has a price tag attached. For more than two decades in San Francisco, PG&E has lobbied City Hall vigorously and used legal maneuvers to keep public power off the ballot. But the company was thwarted in the past year by a voter-backed initiative drive and a Board of Supervisors that advocates local control over the electrical system. The move gained steam with the state energy crisis. If San Francisco voters take the initial steps toward public power on Nov. 6, they will join more than 2,000 public jurisdictions, including Sacramento, Los Angeles and Seattle, that provide electric power to about 40 million customers, accounting for 15 percent of the demand in the United States. Proposition I would establish a municipal utility district, or MUD, in San Francisco and neighboring Brisbane that would be governed by an elected five- member board of directors. Measure-backers included Brisbane to meet a state requirement that more than one jurisdiction in a municipal utility district. The directors after conducting a feasibility study, could decide to provide electricity directly to residents and businesses. They then could use eminent domain to take over the electrical generation and distribution lines from PG&E and the San Francisco-owned Hetch Hetchy Water and Power agency. The other measure, Proposition F, would set up a Water and Power Agency for San Francisco only. The agency would be governed by an elected seven-member board of directors and would replace the mayor-appointed Public Utilities Commission. The PUC currently provides electricity to municipal operations and water and sewer service to homes and businesses. Like the MUD called for in Proposition I, the agency would have to conduct a feasibility study to review the costs and benefits of public power. Then, with the consent of the Board of Supervisors, the agency could take over PG&E's electricity system. No such board consent would be needed under Proposition I. The agency also would have the ability to issue revenue bonds under $100 million without approval by supervisors or voters. Anything over that amount would be subject to a referendum. The Prop. F plan is also designed to promote conservation efforts and renewable energy. Props. F and I both rely on elected directors, who ultimately will decide whether to create a public power system. The board would also set the rates and have control over everything from the terms for buying electricity to whether to use more renewable energy sources, such as wind, hydroelectric and solar power. If both measures pass, Prop. I will take priority. Supervisors placed Prop. F on the ballot as a backup -- one they believe could better withstand the expected legal challenges from PG&E. The utility waged a 23-year battle to beat back public power in Sacramento - - and eventually lost. Opponents of the S.F. public power effort, with PG&E at the lead, already have spent more than $650,000 on the campaigns against the measures with more money expected in the coming weeks. AT&T and Pacific Bell also have been big contributors, fearful that the MUD directors will use state laws to take over the phone and communications utilities in San Francisco, as well. Public power critics say there are too many unknowns in the proposals, chief among them the cost. City Controller Ed Harrington noted that a disputed 1997 study commissioned by the San Francisco PUC estimated the value of PG&E's distribution system at $800 million. Other estimates have ranged from $300 million to $1 billion. "A lot of people are not happy with PG&E. But neither of these measures can guarantee that they're going to solve the state's power problem, or provide us better, more reliable or cheaper service," said Jim Mathias, vice president of public affairs for the San Francisco Chamber of Commerce. "The unknown could be worse." Proponents, however, say a public power system answers to voters and ratepayers, not corporate shareholders. Historically, such public power systems have had lower rates. "The only unknowns are ephemeral because we've seen through the Sacramento MUD, the Alameda MUD and the Los Angeles public power authority that rates are lower and service is better," said Board of Supervisors President Tom Ammiano, a public power advocate. _____ THE MUD MEASURES San Francisco voters face two public power measures on the Nov. 6 ballot. . -- PROPOSITION F Placed on the ballot by the Board of Supervisors, the measure would: -- Abolish San Francisco's Public Utilities Commission and replace it with a Municipal Water and Power Agency. The agency would be governed by an elected seven-member board of directors. -- Authorize the agency to take over the existing Hetch Hetchy Water and Power system, which is now operated by the city PUC. -- Order a feasibility study to determine the costs and benefits of providing public power to San Francisco consumers. -- Operate with the goal of ending Pacific Gas and Electric Co.'s control of electricity distribution in San Francisco and create a public power system that would sell electricity directly to residents and businesses. It also would continue to provide water and sewer service, as the local PUC has. -- Allow the agency to issue revenue bonds without approval by the Board of Supervisors or voters. Any bond issue of more than $100 million would be subject to referendum. -- Require the new agency to maintain some ties to City Hall. For example, the Board of Supervisors would have to approve the use of eminent domain to take over PG&E's distribution lines and generation facilities. . -- PROPOSITION I Placed on the ballot by initiative, the measure would: -- Establish a Municipal Utility District for both San Francisco and Brisbane. The district would be run by an elected five-member board of directors. Candidates for the director posts also are on the Nov. 6 ballot. -- Give directors the authority to determine whether to take over PG&E's electrical and distribution system in San Francisco, as well as the Hetch Hetchy system, in order to provide publicly owned power directly to ratepayers. Requires a feasibility study of such an action. Subsequent voter approval of specific projects probably would be required. -- Allow the district to investigate whether it should provide water, transportation, garbage collection, telephone, communications and sewer services, as allowed by state law governing municipal utility districts. -- Give the MUD power as a state agency, independent of the Brisbane and San Francisco local governments, allow the directors to undertake eminent domain proceedings and provide authority to issue revenue bonds. Power plant assessment to be taken over by state Over protests from cities that fear a sharp loss in revenue, the state Board of Equalization voted yesterday to take over the appraisal of power generators but postponed doing so for one year. The delay until Jan. 1, 2003, is designed to give the Legislature time to fix what opponents call a "fatal flaw" in the plan. Under the old rule, property tax revenue from power plants was assessed by the counties, with the property tax going to the redevelopment agencies in the city the plant is situated. The board changed that so that the state now assesses the plant, spreading the money out across the county. That means big losses for a city such as Pittsburg, which has been fighting the plan. The city -- which has two new power plants -- expected $10 million in property tax revenue. With the changes, that will be reduced to just $400,000, said John Knox, an attorney hired by the city. Pittsburg Vice Mayor Frank Aiello said the property tax revenue was one reason the city agreed to have the plants built in its community. "You'll see more and more power plants not being sited," he told the board. "There will be an even bigger energy crisis." He said the move will have a "devastating effect" on the city's redevelopment agency. Supporters of the plan believe power generators have gotten off too easy under local assessors. That is because counties are barred from increasing assessments more than 2 percent a year under Proposition 13. Ontario Electricity Market Inches Closer To Deregulation CALGARY -(Dow Jones)- The province of Ontario opened another door to electric deregulation Wednesday, issuing tough new emission standards for industry and lifting a two-year moratorium on the sale of provincially owned coal-fired generation plants. Loosening Ontario Power Generation's hold on the bulk of the province's power plants is critical to launching an electricity market slated to open by May 2002 - after three delays in as many years. "Putting additional generation assets in the hands of competition to OPG is one of the primary objectives," said John Dalton, director at Navigant Consulting Inc. in Toronto. The utility has five coal-fired power plants, including the 4,000-megawatt Naticoke and 1,975-MW Lambton stations where the government has accepted OPG installing selective catalytic reduction units to cut down smog, rather than converting to other fuels. "Right now, without putting these generation assets under the control of competition, essentially we don't have a power market, we have a regulatory scheme," Dalton said. Sale of the plants had been put on hold until the environment ministry finalized its anti-pollution regulations. The new rules issued Wednesday by Environment Minister Elizabeth Witmer will cap emissions by fossil fuel-burning generation stations starting Jan. 1, and will be fully implemented by 2007. Under the government's plan for deregulation, OPG must sell or lease about 4,00 MW of non-nuclear power within 42 months of market opening. The utility owns 9,700 MW of fossil-fuel capacity, 8,728 MW of nuclear power and 7,309 MW of hydroelectric power. "Lifting the moratorium goes a long way toward OPG moving quickly to its decontrol program, and preparing for an open market," OPG spokesman John Earl said This latest move has the industry optimistic that the provincial government could open electricity markets by early rather than late spring. "We're working on being ready for March 1," an industry source told Dow Jones Newswires. "There will be lots of supply on the market because the economy is slower than anticipated and demand is down. That's what the government wants, lots of supply and some choice for consumers." A separate regulation finalized Wednesday ordered OPG's aging Lakeview plant to stop burning coal by 2005. The edict gave new life to the four units that faced being completely shut down, but still doesn't make them that attractive to buyers, Dalton said. Lakeview operates about 30% of the year at a lower fuel cost than cleaner-burning natural gas plants. Converting to an alternative fuel will increase cost on units that are last on the fossil fuel plant list to be dispatched - meaning they will run even fewer hours and at lower rates. FERC to give states a role in RTO formation WASHINGTON, Oct 24 (Reuters) - U.S. federal energy regulators on Wednesday pledged to create a new body to cooperate with state officials on the planning of regional transmission grid combinations after complaints that they were left out of the process. The Federal Energy Regulatory Commission, which oversees the country's power grid operators, has ordered utilities in the Southeast, Northeast, Midwest and West to combine their assets into a handful of regional transmission organizations (RTOs) by the end of the year. The agency has pushed hard to create the RTOs to avoid a repeat of the power crisis in California last winter, in which the antiquated U.S. grid prevented more power from flowing into the state. FERC commissioners acknowledged on Wednesday that some changes were needed to address criticism from state utilities regulators that they were left out of the RTO rule-making process. STATES GET SEAT AT THE TABLE FERC Commissioner Nora Mead Brownell, a former Pennsylvania regulatory official, proposed creating a regional council that would share authority between FERC and states on setting RTO policies. Citing states' confusion about FERC's direction and inconsistent internal agency communication, Brownell, in a memo to commissioners, said the council "can provide the necessary flexibility that we will likely need moving forward to RTO formation." The request was made by David Svanda, commissioner of the Michigan Public Service Commission, on behalf of six other Midwest states at FERC's workshop on RTOs last week. The move is "a ceding of jurisdiction ... to state regulators for us to co-govern the process with them," FERC Chairman Pat Wood told reporters after the meeting. Wood previously headed Texas' state utility regulatory agency. Of state commissions, Wood said "they need to be invited with a nice seat at the table, not just standing at the door taking tickets." COST-BENEFIT ANALYSIS PROMISED FERC also promised to prepare a formal cost-benefit analysis of RTOs for states and consumers, after some states raised concerns that the costs did not justify the benefits. The agency did not say when the study would be completed. On Tuesday, the New York Independent System Operator (ISO) released its own cost-benefit study, which asserted the creation of a large Northeastern RTO could boost consumer power bills by some $90 million a year. The non-profit New York ISO would also be put out of business by a regional for-profit RTO. However, a separate study issued last month by energy firm Mirant Corp , a supporter of RTOs, concluded that a Northeastern RTO would save consumers $440 million annually. At the meeting, FERC commissioners heard staff presentations on RTO development progress in the Southeast, Northeast and Midwest. But few new details emerged on the ultimate direction FERC will take in guiding utilities. Wood said that more specifics would be available at the next meeting on Nov. 7, just a month ahead of FERC's Dec. 15 deadline for RTO membership. Under FERC's plan, the RTOs would be for-profit groups in the U.S. Northeast, Midwest, Southeast and West. Each region would combine public utility transmission facilities to provide open access, more reliable power and lower rates for consumers.
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