|
|
Enron Mail |
Mime-Version: 1.0
Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Steven J Kean X-To: Bernadette Hawkins X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf ----- Forwarded by Steven J Kean/NA/Enron on 02/28/2001 02:13 PM ----- Jeff Dasovich Sent by: Jeff Dasovich 02/26/2001 02:41 PM To: John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Richard Shapiro/NA/Enron@Enron, mpalmer@enron.com, skean@enron.com, Joe Hartsoe/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Paul Kaufman/PDX/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Sandra McCubbin/NA/Enron@Enron, Scott Govenar <sgovenar@govadv.com< cc: Subject: OP ED in Chronical--Need a Federal Solution to Transmission/Governor Calls for Conservation ON THE GRID OR OFF THE GRID Bigger Is Better An interstate electricity highway could leverage economies of scale to keep the lights on Burton A. Weisbrod, Glen E. Weisbrod Sunday,?February 25, 2001 ,2001 San Francisco Chronicle URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/25/S C177059.DTL WE COULD HAVE left it to the states. When the Interstate Highway System was proposed nearly 50 years ago, we could have said, "Leave it to each state to decide on its roads and to pay for them, or leave it to private enterprise to build toll roads wherever it is profitable." Fortunately, we didn't. Today, vehicles can travel throughout the country on a system of integrated high-capacity roads that crisscross the nation. There are many differences between the flow of cars or trucks and the flow of electricity. But just as the Interstate Highway System ushered in a new era of easier movement of people and goods across the states, allowing enormous economic and social gains, so, too, do we now need to overcome the obstacles to the easy flow of power across state lines. Many forces are at work contributing to California's electricity crises, and power shortages in other parts of the country also are quite possible. The growth of population and industry in California has expanded demand for electricity. Legislative constraints, reflecting environmental protection and other concerns, have discouraged construction of electricity-generating plants. Periodic shutdowns of generation plants for maintenance have caused short- term power shortages. And, in an oddity of California law, the prices that power producers can charge distributors are deregulated, while the prices that those distributors can charge consumers are regulated and restricted. But largely missing from the debate of what can be done to balance supply and demand is discussion of an effective national power grid that would permit substantial amounts of electricity to flow, as highway traffic does, from one state to another. Interstate transmission connections do exist now, but are limited in capacity. They were primarily designed to meet temporary needs associated with local power emergencies, not for sustained use. If those interstate lines were upgraded to greater capacity, then we could move toward actually creating a national power grid. An effective national power grid could result in far more competition among producers of electric power across the nation, and far more options to meet demand in any local area. No state or region would need to depend simply on a small number of generating producers within its borders, and the increased number of interstate competitors would bring greater assurance of supply and lower prices. The underlying problem is basically one of incentives. With the maze of state, and federal regulations on the production, distribution and pricing of electricity, there is great risk and little incentive for private construction of costly transmission lines that cross multiple state borders. Imagine a power plant in state A, but near state B, with that plant occasionally having excess production capacity. There is no market for the power in state B, but there is demand for it in state C, which is adjacent to it. In a smoothly functioning, efficient, power transmission system, power would move from the generating plant in state A, across the border for use in state B, thereby permitting deals so that power produced in that area could be sent to state C. Through such a domino-like process, power available in one region effectively can help alleviate a shortage in another area - with only a series of relatively short-distance transmissions. Development of such an integrated electricity transmission network is what the federal government can and should foster. It would strengthen the nation; it would expand options for users; it would increase competition among suppliers, to the benefit of consumers; it would overcome the multiplicity of state regulations that have the effect of restricting incentives for profitable interstate power transmission. The Interstate Highway System did not solve all the problems of the nation's escalating population of cars, and it was not cheap. But, designed to maximize interconnections between metropolitan areas, with ample systemwide capacity to spare, it did transform the country, binding the 48 contiguous states into an integrated whole. The effect: reduced costs and increased "exports" of California fruits and vegetables to the Midwest, and reduced costs, along with increased exports of Midwest manufactured products to the West. Just as it does not make sense for every state to act like a separate country, building roads just for its own residents, or growing all of its own food supply, it is equally inefficient for each state to independently develop its own power supply. It is foolish to find electricity producers in one state claiming that they should not "help out" consumers in another state. A nationwide system would take better advantage of differential electricity demand in various parts of the country, seasonally and even in the course of a day. To consumers and industrial users in California, the effects of a national electricity transmission grid would be real and enduring, but not spectacular. It would, however, go far to achieving the quiet result that every consumer seeks - lower prices, more reliable electric power supplies. There is no single solution to California's energy crisis, but developing a national interstate electricity highway system would go far toward addressing it. Local power distribution within a state would remain a matter of state control. The federal government's role would be largely to provide financial incentives for constructing additional interstate transmission capacity, and to establish standards for its design and utilization - just as is the case with the Interstate Highway System. A survey of history and government professors conducted by the Brookings Institution last year identified the Interstate Highway System as one of the Top Seven governmental achievements of the last 50 years - along with rebuilding Europe after World War II and expanding the right to vote. An interstate electricity highway system could well be among the top achievements of government in the next half-century. MACRO POWER TRANSMISSION WE HAVE AN ELECTRIC power crisis in California. In fact, we have two problems: a short-term problem and a long-term problem. Short term, the problem, from the consumer perspective, is: -- Soaring electricity bills. -- Fear of paying the mounting debts being incurred by electricity distributors such as Pacific Gas and Electric Co. either in rate increases or higher taxes. -- The threat, and to some users the reality, of no lights, no refrigeration, no heat. These concerns are real and severe. But they are merely symptoms of a serious long-term crisis: Incentives to the power industry are wrong! As Adam Smith reminded us over two centuries ago, we do not look to the good intentions of sellers to get them to serve the public interest; we look to their self interest. Then, as today, wise public policy calls for aligning the two, by providing incentives for the development of an electricity system that provides power that is dependable, is produced efficiently and is distributed competitively, so that prices are low. This long-term problem will not be solved by the series of Band-Aids that governmental officials and power producers and distributors are skirmishing over. Now is the time to develop a long-term plan. Two elements of a long-term plan for efficient and reliable electricity are clear: -- Electricity self-sufficiency for each state is bad policy. It is easy to think that dependency on power imports from other states is a root problem. It is not. Trade and competition mean access to more producers, and that can bring efficiency in electricity no less than in food, electronics or autos, as low-cost sources are utilized. (Promoting more interstate options does not preclude building more local generation, and small, "micro" electricity generating units do have a role as part of an overall electricity policy. However, the advantage of their flexibility must be balanced against their generally higher cost for meeting predictable long-term demand.) -- Incentives are needed to encourage investment in electricity transmission. It does no good to have low-cost power production unless the power can reach users. This is why the federal government has such an important role to play in financially encouraging and supporting a national interstate power highway system. --Burton A. Weisbrod and Glen E. Weisbrod Burton Weisbrod is John Evans Professor of Economics and Fellow, Institute for Policy Research, Northwestern University, and a former senior staff economist on the Council of Economic Advisers to Presidents Kennedy and Johnson. Glen Weisbrod, his son, is president of Economic Development Research Group Inc. in Boston. Burton Weisbrod is John Evans Professor of Economics and Fellow, Institute for Policy Research, Northwestern University, and a former senior staff economist on the Council of Economic Advisers to Presidents Kennedy and Johnson. Glen Weisbrod, his son, is ,2001 San Francisco Chronicle ? Page?WB1 Governor Calls for 10% Cut In Usage On national TV, Davis increases goal on energy Tanya Schevitz, Chronicle Staff Writer Monday,?February 26, 2001 ,2001 San Francisco Chronicle URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/26/M N44189.DTL Signaling a greater urgency in California's power crisis, Gov. Gray Davis said yesterday that keeping the lights and air conditioners running this summer will require every Californian to reduce electricity usage by about 10 percent. In addition, he said, the state must get more electrical power online by then. His call for a 10 percent cut is a significant jump from the 7 percent he was asking for during his State of the State speech last month, and it may be a difficult stretch for consumers. Davis made his remarks on NBC's news show "Meet the Press." State Sen. Don Perata, D-Oakland, praised the governor's statement on national television. "The most important thing right now is that the governor said that, because there has been general skepticism statewide, reflected both in anecdotes and public opinion polls, that we are in fact facing a crisis," Perata said. "If you don't believe, you won't conform, you won't respond." But, he said, Davis will not get the conservation he wants unless consumers are given financial incentives. Perata said he will propose legislation today to give $1 billion to customers who cut down on their electricity use during the summer months. Severin Borenstein, director of the Energy Institute at the University of California at Berkeley, said if temperatures soar this summer, it will take a "huge effort" to keep the state at safe electricity levels. NEED FOR CONSERVATION "We are in big trouble," Borenstein said. "That doesn't mean we can't avoid blackouts -- that means we will have to take serious measures." The needed steps include instituting variable prices for commercial and industrial users that reflect the supply and demand at any given hour and hooking up air conditioners to cycling systems, he said. For residential users, he said, it will mean increases for use above a certain level. Forecasters predict a shortfall of at least 5,000 megawatts this summer, but the state got some good news Thursday when the California Independent System Operator, which coordinates the flow of electricity through the state's power grid, removed all power alerts for the first time in more than a month. Lorie O'Donley, a spokeswoman for the California ISO, said that she does not expect any changes today but that it is too early to make any predictions about the summer power situation. "We still need to check the snowpack and the hills and the hydro situation in the state," O'Donley said. "Conservation is a big part of it, and whatever people can do to step up their conservation efforts will be a huge factor in avoiding blackouts." GOVERNOR DODGES BLAME Davis appeared on "Meet the Press" while visiting Washington, D.C., for a meeting of the National Governors Association and a concurrent meeting of the Democratic Governors Association, which he chairs. With him on the program were Sen. John Kerry, D-Mass., Sen. Pete Domenici, R-N.M., and Republican Gov. Mike Huckabee of Arkansas. Davis took the opportunity of the high-profile television show to tell East Coast decisionmakers and Wall Street analysts that the blame for the state's energy crisis does not lie with him and to reassure them that he is taking solid steps to resolve the problem. "Both President Bush and I inherited California, a flawed deregulation system," he said during the broadcast. "Secondly, no major plant has been built in California prior to my governorship for 12 years." He outlined some solutions, including the approval of nine new power plants, with six under construction and three expected to be online this summer, and 14 more in the pipeline. In a slip of the tongue, Davis said on yesterday morning's broadcast that consumers would need to cut electricity use to only 10 percent of last year. "It will require every Californian using about 10 percent of the electricity than they did the year before and a little luck in getting some extra megawatts on line this summer," Davis said. What he meant, a spokesman said, was they had to cut use by 10 percent. Still, that will require significant sacrifice. In addition, Davis has said that he wants to add 5,000 megawatts of power -- enough for 5 million homes -- by summer. He has promised to speed up the approval process and provide bonuses to builders who finish before July. The state also established an $800 million conservation program this year. But Borenstein said that many of the ideas floating around for spending the conservation money are for efforts that would not help for about another three years. ON NATIONAL MATTERS During yesterday's show, Davis also weighed in on President Bush's tax-cut proposal and former President Bill Clinton's controversial last-minute pardons. The administration should wait for a tax cut until the money is available, he said. "All of us who have been in government for a while have seen the roller- coaster ride of surpluses and then shortages and surpluses and shortages," he said. "Clearly, people need tax relief, but it should be moderated to the point where we don't kill the golden goose, which is a strong, growing economy. " Although he received a significant campaign donation from the father of Carlos Vignali, the Los Angeles drug kingpin, Davis told show host Tim Russert that he never spoke with the family about the presidential pardon Vignali received on Clinton's last day in office. Davis said he did not have enough information to know whether the pardon was a mistake, but, he said, "there's something about them in general that doesn't ring right." "However," he said, "people expect us to focus on things that matter to them, and they really want to see progress on education, the environment, tax relief, health care." Asked by Russert whether he is going to run for president in 2004, Davis did not rule it out but said that only re-election to the governorship in 2002 is on his horizon. "I'm focused on keeping the lights on and making our schools better," he said. E-mail Tanya Schevitz at tschevitz@sfchronicle.com. ,2001 San Francisco Chronicle ? Page?A1
|