Competition, Deregulation and Forecasting


LCG Completes Analysis for California Energy Commission To Predict Results of State's Deregulation Process

The future of California's electricity industry is spelled out in a report bearing the title "Modeling Competitive Energy Market in California: Analysis of Restructuring." The report weighs only 13 ounces but those 13 ounces carry a lot of weight. The report was prepared by LCG Consulting of Los Altos, Calif., for the California Energy Commission using proprietary software. It takes a look at what will likely be the consequences of electric deregulation in the state under a number of different scenarios. What will become of the state's investor-owned utilities, its municipal utilities and cooperatives, the regional transmission grid? It's all there.

Not only is it all there, it's there in dollars, in megawatts, in tons of pollutants.

Detailed examples are given, under a variety of circumstances, for almost every conceivable measurable aspect of the operation of the electric infrastructure. And it is detailed, addressing not only a broad picture of how California interacts with the entire western region known as the Western System Coordinating Council (WSCC) but such minutiae as hourly flows through different segments of the WSCC transmission grid, especially those under the control of an independent system operator, hourly market clearing prices for a power exchange and hourly price duration curves for the several zones in California.

Even--perhaps especially--the non-technical eye is caught by graphic and tabular presentation of information that can best be characterized as astonishing. To learn, for example, that in peak demand hours the increased production of electricity will at some point result in precipitous increases in the market price of electricity is due to shortage of energy from economically efficient units or due to unscheduled outages of base load plants. The reader who studies tables of generation costs and revenues will likely be surprised that not all electricity costs the same; all three of the state's investor-owned utilities have power plants that are more than twice as costly as others. These, and scores of other facts, are food for the questioning mind.

The massive outages that affected the western third of the United States on July 2 and August 10 are still fresh in most minds. This study sheds no light on their causes but it does tell us what the mysterious "Western Grid" is. It turns out to be, for example, one hundred thousand miles of transmission lines (enough wire to reach halfway to the moon). Reading that, the reader becomes a little more tolerant of the tree trimmers who missed a tree in Wyoming that caused the first outage, or the tree in Oregon that caused the second.

The report is a "must read" for someone involved in electric restructuring in the West, and it is certainly "essential reading" for anyone associated with the utilities or regulatory bodies or other stakeholders in the process.

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