WHAT CAN NEW ENGLAND LEARN FROM CALIFORNIA?

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WHAT CAN NEW ENGLAND LEARN FROM CALIFORNIA?

• John Stutz
• Tellus Institute
• 11 Arlington Street
• Boston, MA 02116
• Tel [phone] Fax [phone]
• E-mail jstutz_at_tellus.org
• January 29, 2001

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Three Key Features of the California Experience

• They didnt see it coming.
• Unimaginable events rolling blackouts and
  utilities at the brink of bankruptcy occurred.
• After 6 months of crisis there is still no plan
  to fix it.

3
Foresight?

• Californias restructured electric energy
  industry has been the subject of extensive
  discussions around the world and has been
  recognized as a benchmark and showcase for
  restructuring of a traditional regulated and
  vertically integrated electric utility industry.
  (emphasis added)
• Evolution of the California Independent System
  Operator Markets, Ziad Alaywan, Managing
  Director of Engineering and Operations at the CA
  ISO, Electricity Journal, July 2000.

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Is It Fixed Yet?

• Theres a good possibility that over the next
  couple of weeks there will be another day or two
  of blackouts. And unless we have an unbelievably
  cool summer this year, there will be afternoons
  when we will have rolling outages again too.
• Ken Fluckiger, Chief Operations Officer of the CA
  ISO as quoted in Time, issue of January 29, 2001.

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Troubling Signs in New England

• Shifts in energy prices in the New England Spot
  Market.
• Growth in the price of Last Resort Service.
• The factors driving New Englands power
  generators.

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NEPOOL Clearing Prices and Hourly LoadDecember
1999 2000
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Last Resort Service Prices in RI
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What Drives the Generators in the New England
Market?

• The shift in importance from long-term to
  short-term (less than five years) returns.
• Concern about competitors who may flood the
  market with capacity and drive down prices.
• John Trawick of Southern Energy, cited in The
  Impact of Deregulation on Siting New Power
  Generation by Katharine Richler Bass, in
  Corporate Environmental Strategy, Vol. 7, No. 2,
  2000.

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What Can States Do?

• Investigate the potential for Demand Side
  Response and arrange to tap it fully.
• Develop standards for Just and Reasonable rates.
  Push for market monitoring consistent with those
  standards.
• Plan to provide Last Resort Service on a
  long-term basis.
• Explore alternatives to the market, such as
  generation by state power authorities.