LCG Publishes 2024 Annual Outlook for Texas Electricity Market (ERCOT)

LCG, October 10, 2023 – LCG Consulting (LCG) has released its annual outlook of the ERCOT wholesale electricity market for 2024, based on the most likely weather, market, transmission, and generator conditions.

Read more

LCG Publishes 2024 Annual Outlook for Texas Electricity Market (ERCOT)

LCG, October 10, 2023 – LCG Consulting (LCG) has released its annual outlook of the ERCOT wholesale electricity market for 2024, based on the most likely weather, market, transmission, and generator conditions.

Read more

Industry News

California Capsule: Electricity Rates Could Double

LCG, March 26, 2001The head of the California Public Utilities Commission said yesterday she will propose that electricity rates in the state be raised. Saying the PUC "has substantial evidence that it didn't have 90 days ago," Loretta Lynch said she may recommend the rate hike as early as tomorrow.

Gov. Gray Davis has been saying since he became aware of the state's energy problems last summer that he believes a solution can be found "within the current rate structure," a structure of surprising elasticity that now has room for a 19 percent rate increase.

State lawmakers are talking about much higher rate hikes, throwing around such numbers as 23 percent, 50 percent and even 100 percent.

In a report carried by Dow Jones Newswires yesterday, an unnamed "key Democratic state senator" was quoted as saying that if rate hikes had been granted in January, the California Department of Water Resources would not have had to spend nearly $4 billion buying power and the state would not be trying to buy the investor-owned utilities' transmission systems.

"Think about it. PG&E and Edison could have regained access to loans and would have been able to restore their credit," the senator told Dow Jones. "We ultimately spent more than $5 billion than we should have if a rate increase is approved. That's not counting, the billions of dollars more we spent and are going to spend on long-term contracts, transmission assets and revenue bonds. People are going to want answers and I don't know what we're going to tell them."

The talk of rate increases, unthinkable a week ago, stems from a briefing held Friday by members of Davis' staff for the legislature. The lawmakers were told that the governor's plan to issue $10 billion in bonds to pay for power purchases would be insufficient and a realistic figure could be as high as $23 billion.

State financial officials have said that even a $10 billion bond issue would be difficult or impossible if sufficient revenue to service the debt was not forthcoming from sale of the power. In other words, buying the power would depend on selling it for enough to cover its cost. Sale of $23 billion in bonds would presumably be 2.3 times as hard.

Lynch said the PUC could vote tomorrow to raise rates and take care of the mechanics later. She said she favors a "tiered" rate structure that would penalize heavy users who failed to cut back on power consumption. "Tiered rates make sense (for) conservation," she said, "because I know we're going to have supply problems this summer."

The governor's office seems trapped in denial. Davis' press secretary, Steve Maviglio, called the $23 billion figure "wildly speculative" and said the governor remains optimistic that consumers might get "billions of dollars in refunds" from out-of-state power producers as a result of Federal Energy Regulatory Commission action.

And there was more from California over the weekend.

  • State Senate president pro tem John Burton, a San Francisco Democrat who likes to talk tough, said the state could forcibly take over the power plants by eminent domain. "If we are going to spend $20 or $30 billion, we might as well own them," he said. Tom Williams, a spokesman for Duke Energy Corp., said "We would vigorously defend our interests." Burton may not have considered how the state would replace the tens of millions of dollars in annual tax revenues generated by the power plants if the state owned them.

  • The ruling last week by a federal judge freeing CalEnergy from selling electricity to Southern California Edison Co. could open the door for other so-called "qualifying facilities" to get out of their contracts with investor-owned utilities. Vincent Signorotti, a spokesman for CalEnergy, said other QFs were calling Friday asking for copies of the ruling and "might use the litigation as a template fortheir own legal action."
    A spokeswoman for FPL Energy, which operated 1,188 megawatts of wind power generation in California, said her company was reviewing the judge's ruling with an eye to getting out of the contracts, but conceded "It's difficult to market wind energy on a demand basis." Cavanta Energy Group, which has 17 small power plants, said it would like to get out of its utility contracts. A spokesman said "It makes sense for us to sell our power to someone who can pay for it."
    SoCal Ed looked at the good and the bad of the judge's ruling. The bad was, it lost a source of power at rates less than the soaring spot market power costs. The good was, CalEnergy won its case if it hadn't, it had promised to force the utility into involuntary bankruptcy.

  • Three out-of-state power producers, accused of overcharging California for electricity, have said they will justify their rates to FERC. Duke Energy Corp. said this morning that it had made a compliance filing with FERC saying its prices were reasonable and reflected market conditions and the prevailing credit issue surrounding sales to the California Independent System Operator and the now-defunct California Power Exchange. Duke said its bids for January and February of this year included a commercially based credit premium to cover a "substantial risk" of non-payment. Duke said it would forgive the credit premium if it could collect its bills. "We cannot lose sight of the fact that most energy suppliers have yet to be paid for a substantial amount of the energy consumed in California in January and February," said Jim Donnell, chief executive of Duke Energy North America.
    Mirant Corp., the former Southern Energy, said again on Friday that is has provided all available electricity from its California power plants at fair and reasonable prices. "Prices for electricity coming from these plants have always been fair and reasonable, particularly when you consider the cost of fuel, the severe imbalance of supply and demand in the state, and the mechanism the state established to dictate final prices," said Randy Harrison, chief executive of Mirant's western U.S. operations. "And if a generation unit in one of our plants was offline during a critical time, it was because it was broken and operating it posed an employee safety threat or an environmental risk. Repairs were made as quickly as humanly possible."
    The Williams Cos., which markets power produced by California power plants belonging to AES Corp., responded to FERC's demand for a refund, saying it disagreed with the way the federal agency figured what was "just and reasonable." "We believe that the FERC's approach does not reflect allrelevant costs, including any payment for return on investment, lost opportunity or credit risk taken by power suppliers," said Bill Hobbs, president of Williams' energy marketing and trading unit. "In short, we didn't overcharge anybody. What all this appears to be is an attempt to install price controls, which have never been shown to be in the best interest of any healthy market, energy or otherwise."

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