Message-ID: <209878.1075846364000.JavaMail.evans@thyme> Date: Wed, 13 Dec 2000 05:18:00 -0800 (PST) From: joseph.alamo@enron.com To: susan.mara@enron.com, sandra.mccubbin@enron.com, mona.petrochko@enron.com, jeff.dasovich@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, steven.kean@enron.com, karen.denne@enron.com, mark.palmer@enron.com, joe.hartsoe@enron.com, sarah.novosel@enron.com, paul.kaufman@enron.com, mary.hain@enron.com, dbenevid@enron.com, christopher.calger@enron.com, tim.belden@enron.com, robert.badeer@enron.com, roger.yang@enron.com Subject: SF Chron Article: "Neighbors In a Power Struggle Cc: lysa.akin@enron.com, ginger.dernehl@enron.com, marcia.linton@enron.com, maureen.mcvicker@enron.com, tracy.cooper@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit Bcc: lysa.akin@enron.com, ginger.dernehl@enron.com, marcia.linton@enron.com, maureen.mcvicker@enron.com, tracy.cooper@enron.com X-From: Joseph Alamo X-To: Susan J Mara, Sandra McCubbin, Mona L Petrochko, Jeff Dasovich, Richard Shapiro, James D Steffes, Steven J Kean, Karen Denne, Mark Palmer, Joe Hartsoe, Sarah Novosel, Paul Kaufman, Mary Hain, dbenevid@enron.com, Christopher F Calger, Tim Belden, Robert Badeer, Roger Yang X-cc: Lysa Akin, Ginger Dernehl, Marcia A Linton, Maureen McVicker, Tracy Cooper X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Notes inbox X-Origin: KEAN-S X-FileName: skean.nsf Neighbors In a Power Struggle State, Northwest trade blame for energy woes David Lazarus, Chronicle Staff Writer Wednesday,?December 13, 2000 ,2000 San Francisco Chronicle California officials have blamed the state's energy woes in part on the Pacific Northwest's not having enough extra power to share. But in Oregon and Washington, they're blaming California for not coming through on a decades-old bargain to supply much-needed electricity in the winter in return for the Northwest's juice in the summer. If the current power shortages worsen, consumers throughout the West Coast face an increasing likelihood of blackouts. Until now, California and the Pacific Northwest have enjoyed a mutually beneficial power-sharing arrangement whereby shortfalls in one area are made up for by surpluses in the other. "We've had a traditional reliance on California in the winter," said Dulcy Mahar, a spokeswoman for the Bonneville Power Administration in Portland, Ore., which sells power produced by federal dams in the region. "Without California's electricity, we've had to take some extraordinary steps." Chief among those steps is tapping into dam reservoirs that, in a normal year, would be used to generate power next summer. As a result, the risk is growing day by day that the Northwest will be unable to help meet California's surging energy demand in the months ahead, when millions of air conditioners are added to the state's already strained electricity system. "Next summer is going to be twice as bad as last summer," predicted Kellan Fluckiger, chief operating officer of the California Independent System Operator, which oversees the state's power network. "Each summer after that is going to get progressively worse until blackouts become a normal part of a hot summer afternoon," he said. The ISO called a Stage 2 power emergency at 5:10 p.m. yesterday as reserves fell once again to dangerously low levels. Power was cut to some voluntary users. Meanwhile, federal regulators agreed to consider a request from the California Power Exchange, which coordinates the state's wholesale power market, to restore price caps for electricity rates. A $250-per-megawatt limit was lifted by state officials last week. On Monday, wholesale power prices spiked as high as $900 and are expected to top $1,000 today. Last year at this time, electricity could be bought by utilities such as San Francisco's Pacific Gas & Electric Co. for a mere $45 per megawatt. Against this backdrop, California and Pacific Northwest power agencies are scrambling to meet demand as a previously complementary relationship falls apart. "We never saw such a tight demand-supply situation," said John Harrison, a spokesman for the Northwest Power Planning Council, a four-state body charged with balancing energy production with environmental concerns. "The timing of this really caught us by surprise." California and the Northwest recognized years ago that power needs in the two regions are completely dissimilar. In California, demand for electricity soars in the summer, when all those air conditioners add to the state's already considerable energy load. In Oregon and Washington, demand climbs in the winter because nearly half of all homes are heated with electricity, a reflection of the region's historically dirt-cheap power prices. More than half of all power in Oregon, Washington, Idaho and western Montana comes from dams along the Columbia, Snake and other rivers. These include 28 federally owned dams from which the Bonneville Power Administration sells electricity to customers basically at cost. For decades, the arrangement worked fine. California helped heat the Northwest in the winter, and the Northwest helped cool California in the summer. This year, however, everything changed. As California stumbled from one crisis to another amid a bungled effort to deregulate the power market, demand far outpaced available supply and a threat of blackouts has persisted since June. The state is now grappling with an unprecedented winter power shortage, caused in large part by an unusually high number of plants being down for scheduled and unscheduled maintenance or because they have exceeded annual pollution limits. Whereas California normally would be exporting power to other states at this time of year, it is now frantically hunting for out-of-state generators that can come through in a pinch. And without excess California energy supplies making their way across the border, power officials in the Northwest are struggling to find enough juice to keep homes warm as temperatures plunge this week about 10 degrees below normal. An arctic cold snap expected to hit last night will only make matters worse. According to official projections, the Northwest will come up short next month in meeting its power needs by more than 4,000 megawatts -- roughly the amount of electricity required to light up four cities the size of Portland. Exacerbating the situation is the fact that the region has faced an unusually dry winter so far. This has lowered reservoir levels behind dams and indicates a smaller-than-normal snowpack in the mountains, which would affect rivers in the spring. Mahar also said Bonneville and other power providers already were tapping into reservoirs to provide additional power through the winter. Unless the rain and snow arrive in full fury next month, Mahar said, this almost certainly will reduce the Northwest's ability to help meet California's energy needs in the summer. "Our reservoirs are like savings accounts," she said. "When we cash them out, we don't have enough left in the bank." Steve Johnson, executive director of the Washington Public Utility District Association, a Seattle trade group representing 28 regional utilities, said the shortfall in power from California would force the Northwest to improvise for weeks to come. "We're trying to buy energy every place we can find it," he said. Like many observers north of the border, Johnson is dismayed by California's efforts to deregulate the state's electricity market. "We think you made a terrible mess of it," he said. And now, he pointed out, California's troubles have become a headache for other states as well -- with no end to the problem in sight.