California can better manage its demand for power, officials say

The Associated Press
Wednesday February 14, 2001

SAN DIEGO — California must better manage its thirst for electricity to accommodate the spikes in demand that could make the state’s already miserable power situation worse when temperatures soar this summer, officials said. 

While California races to add power plants and boost its supply of electricity, more can be done to influence how – and when – consumers use that power, industry and government officials said. 

A few days each summer, demand for electricity spikes in California, with residential and commercial air conditioning drawing 30 percent of the power consumed in the state. 

With few – if any – energy companies willing to build power plants only to meet those rare spikes of 15,000 or more megawatts, more must be done to manipulate demand, officials said Monday during a “Power Crisis in the West” conference sponsored by Xenergy and Infocast. 

“We have to manage the load – and not just service it as we have in the past,” said Gary Swofford, vice president and chief operating officer of Puget Sound Energy in Bellevue, Wash. 

A major problem, said one utility executive, is that the state’s 1996 deregulation law isolates the consumer from the realities of the marketplace. 

While wholesale prices have soared, California’s utilities have price caps on what they can charge consumers.  

That means without any incentive to reduce use, consumers have kept demand at largely static levels this winter, even as power supplies dwindled, said Stephen Baum, chairman, president and chief executive officer of Sempra Energy, which owns San Diego Gas & Electric and the Southern California Gas Co. 

“The retail price caps have killed any response to the situation,” Baum said. 

Curt Hebert, the newly appointed chairman of the Federal Energy Regulatory Commission, said price caps do both short- and long-term damage by hindering the responsiveness of a supposedly free market. 

“I have never wanted to see prices rise and I certainly don’t want to see that now, but what’s important now is we keep the lights on,” Hebert said. 

William Keese, chairman of the California Energy Commission, said demand can be more responsive to price – even without hiking the price consumers pay. 


Keese said the 15,000 megawatts that go to keeping the state’s homes and workplaces cool during periods of peak demand represent “a massive opportunity for efficiency.” The amount of power is normally enough to light 15 million average California homes. 

Link together, say, hundreds of large commercial buildings in the state with a computerized system that automatically reduces power use during periods of peak demand and the state could be nimble enough to reduce the size of the spike in demand – all without bringing more power plants on line, Keese said. 

“You can ratchet that power up and down faster than you can turn on a power plant,” Keese said. At times of peak demand, when power is at a premium, even a 2.5 percent reduction in consumption can mean $700 million in savings for the state. 

Swofford said Puget Sound Energy has begun experimenting in Washington with showing its 800,000 customers how the price of electricity can vary. For now, the Web-based program is only informational, but the utility hopes it will lead one day to real-time pricing, where the rates a consumer pays for electricity can fluctuate, depending on everything from the season to time of day. 

“We’ve got to get to the point where customers can see price signals,” Swofford said. ”(And) they have got to be in the position where they can respond to what they see.” 

Meanwhile, the state was under a Stage 3 power emergency Tuesday as power reserves threatened to fall below 1.5 percent. Blackouts were not expected. The power alert has been in effect for a record five weeks.