Demand for backup generation creating backlog

Jan. 26, 2001—Demand for backup generation is growing so fast in California manufacturers are hard-pressed to keep up and some consultants report they can’t find the equipment on the West Coast.

The highest demand is from businesses with interruptible power contracts. But others are also installing the equipment to avoid being shutdown during involuntary outages as the state struggles just to keep the lights on. With margins teetering at 1 1/2%, the California Public Utilities Commission has refused to allow businesses in the interruptible program to opt out.

Most of the 1,000 businesses signed up for the programs have experienced more outages and business downtime than they ever anticipated under the tariff. The interruptible program for Southern California Edison Co. involves 1,200 MW in winter and 2,400 MW in summer. Pacific Gas & Electric Co.’s 400 MW program has already expired.

Interruptible load customers agree to have their electricity cut off for a limited number of days in return for a lower year round tariff. The extra power has proved indispensable to the California Independent System Operator to prevent an electricity emergency from deteriorating into a full-fledged black out.

However, businesses on the tariff have been cut off as much as 18 hr/day, sometimes for several days running, during California’ ongoing power crisis. Many are growing weary of the economic losses from shutting down day after day.

“Our customers can’t stand to have any more interruptions,” says Brennan Higgins, energy consultant for Summit Energy Inc. in Louisville, Ky.

Higgins is advising some of his large customers in California to rent or buy utility grade diesel generators.

“If there is a curtailment, they can ride through it at about 15 cents/kw-hr,” he says.

But utility grade generators are hard to find because of the increased demand created by California businesses and other regions where there is a perceived threat to electric reliability. Higgins could not find generators for clients in California except on the East Coast.

No where in California
“You can’t find them anywhere in California,” he says. “The gen sets out East are heading West.”

Rachele Kunz, spokeswoman for Caterpillar Inc., said demand for diesel power generators is the fastest growing part of Caterpillar’s business. She confirmed the company’s generators are on back order and production is running at 100% of capacity. But she declined to disclose details about the length of backlog or other production information.

Businesses on the interruptible tariff in Southern California Edison’s territory can be called at any time. Uncertainty and worry about an even tighter power availability for the upcoming summer has big users like aluminum wheel manufacturers and glass makers shopping for generators.

Higgins says he is preparing power strategies for clients early because summer forecasts suggest the situation will not improve. Meanwhile, companies must wait several months for permits to operate 1-2 MW diesel generators. Generator sets that operate longer than 200 hr/year get approval from the state air quality boards. But no other regulatory approvals are required.

Under the interruptible program’s guidelines, customers can be asked to reduce usage 30 times/year or 100 hr/year. Pacific Gas & Electric Co. said it 2001 interruptible customer program (north of Kern County) has already been exhausted. The California utility has about 170 commercial and industrial customers that voluntarily signed contracts to participate in the program.

Sources close to the issue expect state government to require by executive order that businesses already signed up on interruptible contracts continue participating in the program whether they want to or not. The PUC has postponed until “further notice” its report on interruptible load programs and emergency curtailment plans.