EnergyOnline
Services

RSS FEED

EnergyOnline.com rss

News

Federal Government uses UPLAN model to examine price volatility in ERCOT

LCG, October 11, 2022--The U.S. Energy Information Administration, or EIA, released its latest supplement to the Short-Term Energy Outlook (STEO) in the Texas market, assessing various possible scenarios using LCG’s UPLAN NPM model, with a special focus on the effects on wholesale power prices and market conditions.

Read more

Michigan Governor Supports Reopening Palisades Nuclear Facility

LCG, September 16, 2022--The Governor of Michigan last week sent a letter to the U.S. Department of Energy (DOE) in support of Holtec International’s application for a federal grant under the Civil Nuclear Credit (CNC) program to save the Palisades Nuclear Facility in Southwest Michigan. The federal grant could result in restarting the baseload, carbon-free, nuclear power plant.

Read more

Industry News

PG&E Files for Chapter 11 Protection;Move Sends Davis Back to Square One

LCG, April 9, 2001California's largest utility, driven to the wall by an irrational electric industry deregulation scheme it reluctantly signed off on, filed Friday for protection under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court in San Francisco.

Chapter 11 bankruptcy would give Pacific Gas & Electric Co. protection from its creditors, but the company was also seeking protection from California Gov. Gray Davis and other state politicians who want to take over the utility's transmission system under the guise of "bailing the company out."

In a statewide television speech Thursday evening, Davis said the state would save PG&E and Southern California Edison Co. from bankruptcy but "They must provide low-cost regulated power to the state for 10 years. Agree to sell us their transmission system. And dismiss their lawsuits seeking to double your electricity rates."

PG&E didn't see much of a future in being a vassal to the state. Robert D. Glynn Jr., PG&E's chairman, said Davis' television speech was the last straw. "We listened carefully to the statement and the commentary that followed and this decision is the result," he told reporters following the bankruptcy filing.

Davis responded predictably, saying PG&E acted selfishly. "PG&E was not pushed into bankruptcy," the governor said, "but plunged themselves into bankruptcy for their own strategic advantage."

The utility's action takes the electricity crisis out of the governor's hands and two of his proposals seemed dead: His proposition to take over the transmission facilities owned by the investor-owned utilities and his plan to get small independent power producers back into the market by guaranteeing their payments.

The filing will not stop the hemorrhaging of $50 million per day that the state is taking from its general fund to buy power, but it may prevent the state from recovering part of that money from PG&E. State plans to issue $10 billion in bonds to pay for long-term power purchase contracts were also placed in doubt, if not directly by the bankruptcy filing, by a downgrade of California's credit from "stable" to "negative" by a major bond rating service.

The loss of control over California's power crisis is what the governor and politicians feared most. When Davis met with the Assembly Republican caucus last week, he downplayed the possibility of bankruptcy by either PG&E or SoCal Ed, saying that would be "a nightmare scenario."

Democrat Assemblyman Roderick White of Los Angeles, who is chairman of the lower chamber's Utilities and Commerce Committee, said "We are no longer controlling the outcome. At the beginning of the year, we were in control of this situation. Now we just added a new player to the game one with decision-making power."

That loss of control will be seen by many as evidence of failure on the part of Davis, and his earlier promises won't help. On January 8, in his State of the State message to the legislature and the people, the governor said "To utilities and the financial community, let me say this: I reject the irresponsible notion that we can afford to allow our major utilities to go bankrupt. Our fate is tied to theirs."

The governor predicted that "Bankruptcy would mean that millions of Californians would be subject to electricity blackouts. Public Safety would be jeopardized. Businesses would close. Jobs would be lost. Investment would flee the state. And our economy would suffer a devastating blow."

Those things may not come to pass, but up to the end Davis seemed to be dissembling, playing to the voters instead of to the problem. When he met with the Republican caucus last week, he told the lawmakers that negotiations with PG&E were going well, according to legislators who were at the meeting.

But, just a week earlier Glynn had called the governor and spoke to Davis, warning him that the utility was as close to bankruptcy as it had ever been. Davis ignored the warning and announced his draconian "bailout" terms in his television address. That he was surprised by the bankruptcy filing suggests he was focused more on the political aspects than the practical.

Not all Democrats saw the bankruptcy filing as a disaster. Assemblyman Fred Keeley, one of the more active legislators in the energy crisis, said "This should bring the conversation back to the root cause of this problem: the disparity between supply and demand."

That fundamental shortage of power plants in California is not quite the root cause of the problem. The root cause is the failure of anybody legislators, utility officials, consumer activists, academics, you, me to foresee the shortage of power plants, despite faster than expected growth in state population and a booming high-tech, energy-hungry economy. So long as supply stayed ahead of demand, the state's deregulation plan worked just fine.

There were early indications of the state's power supply shortage, and all of us missed them. On Aug. 5, 1997, months before deregulation went into effect, PG&E and SoCal Edison asked customers with interruptible power contracts to voluntarily curtail electricity use, following an emergency declared by San Diego Gas & Electric Co. when reserves in its service territory dropped below 5 percent. We reported it, but we didn't read anything ominous into it.

Deregulation wasn't a month old when, in April 1998, Enron Corp.'s marketing unit abandoned the California market saying it could not acquire power for the prices state's utilities were retailing it for. That should have told us and everyone else something.

On July 9, 1998, Cal-ISO got hammered. It had to pay $9 million for some backup power. That was 300 times the $30 per megawatt-hour it would have liked to pay. That same day, the head of the California power Exchange was in Seattle telling a conference of the National Association of Regulatory Utility Commissioners that the price spikes that had occurred earlier in the year in the Midwest couldn't happen in California.

An early August 1998 heat wave in California got the Stage 2 power emergencies going and sent the ISO back into the volatile spot market for reliability power. This was a strong signal of what was to come, but none of us were paying attention. The ISO said it was confident there would be plenty of power available in the summer of 1999. All we said was "maybe, maybe not."

By the time deregulation took effect on April 1, 1998, there were plans on the table by private companies to build more than 3,000 megawatts of new generation in the state, and 2,000 megawatts more by August 1998.

Anyone who can answer why those plants were not built by May 2000, when the energy crisis exploded with high market electricity prices passed through to San Diego consumers, will be able to put his finger on the root cause of the California energy crisis.

Which is also the root cause of PG&E's bankruptcy.

Copyright © 2023 LCG Consulting. All rights reserved. Terms and Copyright
UPLAN-NPM
The Locational Marginal Price Model (LMP) Network Power Model
UPLAN-ACE
Day Ahead and Real Time Market Simulation
PowerMax
Day-ahead and real-time portfolio revenue optimization
Generator X
Generation and Transmission Planning and Optimization
UPLAN-G
The Gas Procurement and Competitive Analysis System
PLATO
Database of Plants, Loads, Assets, Transmission...
MarketWatch
Annual summary of prices, congestion and important events in ERCOT
CAISO CRR Auctions
Monthly Price and Congestion Forecasting Service