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PG&E could face mutiny on outages: SMUD, others may balk if
utility orders summer blackouts By Carrie Peyton Bee Staff Writer (Published March 7, 2001) Sacramento's electric utility wants out of a deal that imposes rolling blackouts locally on PG&E's command. So do a lot of other utilities. They've been writing letters, lobbying lawmakers and launching informal talks with Pacific Gas and Electric Co. to get off the hook before summer. Who dodges the blackout bullet "is going to play out as a political hot button" around the state, said George Fraser, head of the Northern California Power Agency, a coalition of municipal utilities. In Sacramento, the next volley is expected soon, with the Sacramento Municipal Utility District reportedly poised to notify PG&E that it will no longer black out homes and businesses on the larger utility's command. "We are absolutely trying to fight off the requirement for rolling blackouts for the Sacramento area," said Linda Davis, one of seven elected members of the SMUD board of directors. Saying they don't want to be dragged down by somebody else's problems, two Southern California utilities have written grid operators asking to be exempted from any blackouts caused by PG&E's or Southern California Edison's financial woes. But in PG&E's view, "California is in an energy crisis (and) ... we're all in this together," said spokesman John Nelson. The maneuvering comes amid bleak forecasts for power supplies this summer. Although Gov. Gray Davis has said conservation, new power plants and moderate weather could avert blackouts, officials at the Independent System Operator, which runs much of California's grid, expect frequent rotating outages. One consulting firm, Cambridge Energy Research Associates, predicts 20 hours of rolling blackouts during July and August, and about 200 hours of especially intense calls for voluntary cutbacks. Before blackouts hit, the jockeying over just whose lights, air conditioners and assembly lines will be shut down is growing. The outcome could affect millions of people statewide. The state Public Utilities Commission is probing rolling blackout programs run by the for-profit utilities it regulates, including PG&E and Edison. A PUC analysis has suggested that PG&E's program, which currently exempts about 40 percent of its customers, should spread the burden more broadly. For example, it said, 1.9 million homes and businesses are spared just because they share a circuit with a customer deemed "essential." But not-for-profit utilities such as SMUD, which answer to their own elected boards or city councils, have other worries. Many have already lined up their power supplies for summer. Some have raised rates or are considering raising rates. Some have taken extra conservation steps. They think those preparations ought to give them leverage to ease blackout clauses in their contracts with PG&E. SMUD general manager Jan Schori "is going to use every avenue ... any avenue, to put pressure on," including lobbying the ISO, the governor and others, said utility director Davis. The Northern California Power Agency, a joint-powers authority that owns and operates power plants for municipal utilities, has begun informal negotiations with PG&E to change blackout rules, according to Fraser, its top executive. It is preparing to write PG&E, asking that its members be exempted from outages altogether. Failing that, it wants them to face fewer outages or to be compensated for cutting off power, he said. At SMUD, the utility board has met in closed session to discuss exactly what it is required to do during electric emergencies, under terms of the interconnection contract that links SMUD's lines to PG&E's. "The contracts are being inspected with a fine-tooth comb," said SMUD director Howard Posner. Schori declined to comment on any specifics. Sources indicated that the main option being considered is notifying PG&E that because of changed circumstances, SMUD believes it no longer is required to routinely comply with outage requests. Other options being explored include re-negotiating existing agreements with PG&E. Posner said that ever since two days of rolling blackouts in January, constituents have been asking him, " 'Why are we participating when we're not the problem?' And I don't have a good answer to that." Several directors said SMUD has already spent a lot of money -- and is considering 16 percent rate increases -- to ensure that it has enough electricity under contract to meet its customers' summer demands. They believe PG&E should do the same. "We're almost like a David against Goliath here," said board vice president Genevieve Shiroma. "The huge investor-owned utilities next door have severe problems that they need to get under control." In addition, SMUD plans to argue that because it can cut usage through its "Peak Corps" program, which remotely turns off air conditioners at volunteer households, it has already done its part without rotating outages, director Davis said. PG&E believes the interconnection agreements that govern smaller utilities' ties to its transmission lines have "benefits and burdens to both sides," said Nelson. "It wouldn't be fair or good policy for just one provision to be altered without taking a look at how that affects the entire contract," he said. Interconnection contracts generally have clauses that require utilities to help each other out to avert greater emergencies. Sometimes reducing demand -- called load shedding -- can be the only way to stabilize the electric grid in the seconds after a major power plant or transmission line fails. "It's been around in the electrical fabric forever," said Jim Pope, head of Silicon Valley Power, Santa Clara's city-run utility. In addition to legal requirements, "you have a moral obligation so you don't bring the system to collapse." Like other city-run utilities, Silicon Valley Power has a contract with PG&E that requires it to shed load during an electric emergency. But its contract allows it to work with big users to reduce their demand, so no one has to be completely shut off. Such agreements, formed long before deregulation when PG&E ran the north state's grid, now are complicated by the 1997 creation of the state Independent System Operator. The ISO today runs pieces of the grid owned by PG&E, Edison, and San Diego Gas & Electric Co. If it believes power use is about to surge past supply, potentially triggering a grid collapse across the western United States, the ISO notifies the three utilities that they have to shed a certain number of megawatts. The big utilities meet that requirement two ways. They cut circuits to some of their own customers, and they tell smaller, connected utilities to cut a proportionate share. In Northern California, about 80 percent of the outages are borne by PG&E customers and the rest by customers of SMUD and other municipal utilities and irrigation districts. "In one sense, we are all in this together. If SMUD were in danger of going down, we would hope others would help us out," said SMUD's Posner. "But that's if we're in danger from circumstances beyond our control, not from mismanagement or lack of financial wherewithal." It is unclear what penalties, if any, a utility would face for violating an interconnection agreement. In the long run, the issue would be fought either in the courts or before the Federal Energy Regulatory Commission, grid officials said. As a practical matter, in the seconds when the risk to the grid is greatest, if one utility refused to shed load, the ISO would probably solve to problem by calling on PG&E, Edison or others who are willing to make deeper cutbacks, they said.
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