California utility regulators say most of blackouts should not have happened

Sept. 18, 2002 — The California Public Utilities Commission (CPUC) obtained and analyzed data on power production, power plant outages, bidding behavior of electricity generators and electricity transmission during the 38 blackout and service interruption days in California occurring from November 2000 through May 2001.

This report analyzes the operations, bids and production and transmission of electricity on the 38 blackout and service interruption days of the five largest non-utility electricity generators – Duke, Dynegy, Mirant and Reliant and AES/Williams.

Based on an hour-by-hour and plant-by-plant analysis of this data, this report concludes that most of California’s power blackouts and service interruptions need not have occurred, CPUC said.

Between November 1, 2000 and May 31, 2001, California’s electricity customers experienced power blackouts and service interruptions on 38 days. Blackouts and service interruptions during this energy crisis disrupted commerce and compromised public safety, affecting roughly one-third of all Californians.

Certain large commercial and industrial customers who had agreed to limited service interruptions in exchange for lower rates (“non-firm” customers) had to shut down operations much more frequently than was necessary or anticipated, often day after day.

If the state’s five largest independent electricity generators had operated all of their available capacity from November 2000 through May 2001 (the height of California’s energy crisis), California’s citizens could have avoided:

“- All 4 days of blackouts in Southern California;
“- 65% of the blackout hours in Northern California;
“- 81% of service interruption hours in the South, and
“- 51% of service interruption hours in the North;

This report also finds:
“- On all but 2 of the 32 statewide blackout and service interruption days shown, the five biggest independent electricity generators did not supply well over 500 megawatts of power that they could have generated.

Sufficient generating capacity for California’s families and businesses existed, but blackouts and service interruptions occurred, because generators, Duke, Dynegy, Mirant, Reliant and AES/Williams, did not produce needed power even though their plants could have met California’s electricity needs.

This report reaches these conclusions by treating as valid every plant outage reported by any generator, even though reported plant outages were well above historical averages during this period. The CPUC’s investigation of reported outages remains ongoing and is not the subject of this report.

This report treats as “available power” during a particular hour only power that was available according to data from the California Independent System Operator (ISO). The ISO’s data was based on reports submitted by the generators themselves.

CPUC’s analysis gives the generators the benefit of the doubt in several ways, chiefly by accepting generator claims of plant outages and mechanical problems at face value, and giving full credit for their out-of-market sales.

This report also examines the behavior of each of the five generators on each of the blackout and service interruption days during the crisis. When the generators’ own data on plant outages is added to the data on power not generated, the combined data shows that between 37% and 46% of the total generating capacity of the five generators was either not available, or not supplied, on the 32 statewide blackout and service interruption days that are the focus of this report.

“- 37% of Dynegy’s capacity was either out of service or not made available;
“- 38% of Duke’s capacity was either out of service or not made available;
“- 42% of Reliant’s capacity was either out of service or not made available;
“- 42% of Mirant’s capacity was either out of service or not made available; and
“- 46% of Williams/AES’s capacity was either out of service or not made available.

During all of the statewide blackouts and service interruptions, the five generators also failed to bid all available power into the ISO’s markets, the report said.

Had the generators produced the power they had available, most of the statewide blackouts and service interruptions could have been avoided without overloading the transmission lines linking Northern and Southern California.

For firm-service customers, all of the blackouts in Southern California and 65% of the blackouts in Northern California could have been avoided. For interruptible customers, 82% of interruption hours in Southern California; and 51% of interruption hours in Northern California could have been avoided.

It is important to note that this report makes no finding that any of the blackouts or service interruptions was unavoidable. The analysis merely establishes that Californians need not have experienced the large majority of blackouts and service interruptions in 2000 – 2001.

Throughout the crisis, the ISO was declaring emergencies on an almost daily basis and urgently seeking all available power, making it obvious that wholesale electricity generators should have bid in, or otherwise provided, every last megawatt of power in order to help alleviate the crisis. There are a number of possible reasons why a given generator did not generate power on a given blackout or service interruption day.

For example, the ISO may not have used all available bids, the generator may not have followed ISO instructions, or, occasionally, local power lines may have been full. None of these reasons provides a justification for the generators’ failure to bid in all available power on a blackout or service interruption day.

Even accepting the generators’ claims regarding plant outages and mechanical problems as valid, the rate of plant outages during the energy crisis was well above historical averages. For example, well over 40% of the capacity of Mirant, Reliant and Williams/AES was either not available or not used to meet California’s energy needs during blackouts and service interruptions.

Beyond failing to bid all available power into real-time markets, generators withheld power using several other strategies. At various times generators:
“- Failed to follow or delayed their responses to ISO requests to produce power;
“- Declined the ISO’s automated dispatch instructions;
“- Failed to take all actions necessary to make plants available as soon as possible after plant outages; and
“- Failed to provide adequate fuel and staffing for plants.

Preventing Future Artificial Electricity Shortages
Reforms are needed to assure that in the future, the generators cannot create artificial power shortages and market distortions like those of the 2000-2001 energy crisis.

California Legislative Action
California has enacted several of the needed reforms that are within the State’s authority. For example, Senate Bill 39 of the Second Extraordinary Session, Statutes of 2002, Chapter 19 (SB 39XX), will help alleviate potential future power shortages by allowing the state to:

“- Monitor the generators to detect unnecessary outages as they occur.
“- Regulate the generators’ planned power plant shutdowns.
“- Review the legitimacy of the generators’ unplanned shutdowns.
“- Penalize generators and scheduling coordinators who violate the new regulations.

Since the adoption of SB 39XX, the ISO and the CPUC are developing procedures for scheduling outages and evaluating power plant performance. Armed with the new authority provided by SB 39XX, the CPUC and the ISO will develop maintenance and operations standards by the end of 2002, and the CPUC will deploy a monitoring and enforcement program.

However, further legislative action may prove necessary to protect Californians from future power shortages. Specifically, if conditions warrant, the California Legislature could modify or repeal Public Utilities Code Section 216(g), which provides that the generators are not treated as public utilities under state law solely by virtue of their ownership or operation of wholesale electrical generation facilities. This reform would make it possible for California to assure that generators are not able to withhold power in the future.

FERC Action
The Federal Energy Regulatory Commission (FERC) should adopt important additional reforms. These include reforms of the ISO tariffs and procedures that are currently proposed to FERC.

In an Order issued on July 17, 2002, FERC partially addressed these issues, but FERC’s action is not sufficient to safeguard consumers from generator manipulation that could result in unjust and unreasonable electricity prices. The following reforms are necessary:

“- FERC must revoke its enormous and unjustifiable recent increase in the price caps for California electricity (from $92 per megawatt to $250 per megawatt).

“- The ISO’s market operations and bidding rules must be redesigned to reduce gaming and market manipulation and prohibit deceptive bidding and power scheduling.

“- FERC must protect California’s and the states’ crucial role in regulating electric utilities and transmission organizations like the ISO, in protecting consumers from unjust and unreasonable rates, and in planning their electricity future.

This report was released by the California Public Utility Commission on Tuesday, Sept. 17, 2002. To read the report in its entirety or view the charts and tables, please visit the following link:


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