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.

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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

Regulators Cap San Diego Electric Rates

LCG, Aug. 22, 2000--The California Public Utilities Commission, under pressure from San Diego politicians, yesterday voted 3-2 to put a lid on the prices San Diego Gas & Electric Co. charges its customers for electricity, even though the utility no longer makes its own power.

SDG&E residential customers have seen their electric bills rise from about $55 in May to around $125 now, and all classes of customers have been similarly affected. The utility explains that because it sold off its power plants as part of electric industry restructuring in the state it must now purchase power on the open market and is simply passing along the price it pay to its customers.

The causes go deeper than that and are the result of the confluence of a number of forces, many of which were working long before electric deregulation came to California in January 1998.

  • There are insufficient numbers of power plants in California, forcing the state to import 25 percent of its electricity from neighboring states.

  • There are two major reasons why no new power plants have been built in California in the last decade or more. First, the Public Utility Regulatory Policies Act of 1978 (PURPA) required that all U.S. public utilities purchase a portion of their power from independent power companies. The objective was to make the U.S. less dependent upon investor-owned utilities for electricity. The result was to discourage investment by those utilities in new power plants.

  • The other big reason why investor-owned utilities have not built new power plants is regulatory uncertainty. Having taken a look at deregulation of the telephone industry, they were loath to make large infrastructure investments. They were proved correct when deregulation forced them to sell off their generation assets.

  • The booming economy in the West and particularly California has placed enormous strain on existing generating capacity because that economy has been fueled by high-tech industries that not only consume a great amount of electricity but also produce goods that run on electricity.

  • California is not alone in riding this economic wave, so states from which it has imported power have less power to sell to California.

  • As electric deregulation approached, private companies became interested in building power plants in California. There are today close to 12,000 megawatts of new power plants proposed for the state. They have been on the drawing boards for a couple of years but have had trouble getting off because the California Energy Commission must approve every new power plant and that commission is among the slowest agencies extant.

  • Utilites such as SDG&E are required under Californias electric restructuring law to purchase all of their power through the California Power Exchange. While that exchange offers forwards markets where contracts for blocks of power can be negotiated well in advance of expected need, it is still a commodities market. Much of the power bought and sold is in its "real-time" or spot market, which is extremely volatile. That market, which should account for only about 2 percent of the power bought and sold, accounts for perhaps a quarter.

  • The investor-owned utilities are prevented by law from entering into long-term bilateral contracts under which they would be guaranteed electricity at a negotiated price.

  • Finally, a populace that is growing ever more sybaritic has forgot how to open windows and relies exclusively on air-conditioning for relief on a hot day.

The result is, when SDG&E paid off its stranded costs and no longer fell under the price freeze that came along with deregulation, its customers were exposed to the volatility of the spot power market. Instead of paying $25 per megawatt-hour for power, they paid up to $750 until the California Independent System Operator imposed a $250 cap on what could be paid in the real time market.

Now, the CPUC yesterday places a $68 lid on the electric bills of residential customers who consume no more than 500 kilowatt-hours of electricity per month, and $220 for small commercial customers who keep their consumption to 1,500 kilowatt-hours per month. Those customers represent 70 percent of San Diego electricity consumers.

The other 30 percent are hollering bloody murder. Susan Bauman, who owns the Bali Hai restaurant, saw her electric bill go from $5,700 in June to $10,204 in July. She is a small commercial customer for whom the 1,500 megawatt cut-off is meaningless. "They did nothing to help me today," she said. Bali Hai is not your basic McDonalds, where the average use in San Diego is 1,450 kilowatt-hours according to the CPUC.

Some politicians want to unravel the deregulation process. San Diego County Supervisor Dianne Jacob said "We got little or no relief today, so well take the battle to Sacramento." Two state lawmakers, Assemblywoman Susan Davis, a San Diego Democrat, and Sen. Dede Alpert, a Democrat from Coronado, had introduced legislation that would roll back electricity rates in San Diego and freeze them. The measure has already passed the state Senate.

Alper said she doubted that it would be possible to get the minimum eight Republican votes she needs to pass the roll-back bill in the Assemble before the Legislature adjourns on August 31.

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