California Energy Commission predicts promising electricity supply and demand for next five years

SACRAMENTO, Calif., Jan. 29, 2003 — The California Energy Commission predicts that electricity demand and supply for the State looks promising this summer, and supplies should continue to remain positive through the year 2005.

According to testimony the Energy Commission presented today before the State Senate Energy Committee, California should have a nine percent operating reserve during the critical summer months of July, August and September, even without counting spot market imports that might be needed under extremely hot weather conditions. When the expected spot market purchases from outside the State are included in the forecast, operating reserves increase to 15 percent during the most critical months.

Steve Larson, the Energy Commission’s Executive Director, told the committee that the situation could be even healthier if the weather cooperates. “In a more normal, cooler weather probability scenario,” he said, “the reserve margin increases to 16 percent, climbing to a 20 percent reserve margin with the addition of probable spot market purchases.”

Analysis by Energy Commission staff finds that California’s power situation has improved since the Electricity Crisis of 2000. First, 18 new power plants have been licensed and constructed, adding over 4,980 megawatts to the grid. By August 2003, seven additional power plants generating 3,106 more megawatts will come online. Also, 25 renewable energy power plants — adding nearly 110 megawatts — have been funded through the Energy Commission’s New Renewable Account, with an additional 12 megawatts coming on line before August, 2003.

Second, as a result of emergency energy legislation, energy efficiency projects are now in place to save electricity at critical peak-load times. These yield over 1,100 megawatts of savings from programs such as installing real time meters, implementing energy efficiency measures in State buildings, retrofitting equipment at waste water treatment facilities and installing LED traffic lights.

Third, California is not the only state constructing new power plants to meet growing electricity demand throughout the West. “Supply has outpaced demand in the Southwest and Northwest over the past two years by about 8,000 megawatts,” Larson told the Senate committee.

In addition to forecasting electricity supply and demand in 2003, the Energy Commission also looked at the electricity picture for the years 2004 to 2008. Because this projection looks farther into the future, there is more uncertainty built into its estimated values. The 2004-2008 projection also employs a planning reserve margin, which differs from an operating reserve by not accounting for forced outages or spot market purchases. Since power plant additions are usually planned two to four years before they need to come on line, resource additions for this period remain uncertain, the Commission’s 2004-2008 projection shows declining reserve margins.

Larson explained that California’s electricity system “appears to be in good shape through 2005, given the new generation from power plants both instate and in neighboring states and the ongoing energy efficiency programs.” Natural gas prices have declined from their high levels in 2000 through 2001 and electricity contracts signed in 2001 by the California Department of Water Resources have ensured that there will be sufficient capacity to meet load.

“To assure its energy future, however, California must to continue the energy efficient ways that makes us the most electricity efficient state in the nation. We can’t forget that the cheapest kilowatt is the one that we never use,” Larson said.

Today’s Energy Commission presentation to the Senate Energy Committee can be viewed on-line at www.energy.ca.gov/electricity