Viridian Note 00220: California Crisis Part 3Bruce Sterling [email@example.com]
Attention Conservation Notice: Following the money hither and yon. Over 2,600 words
Links: http://www.pge.com/003_save_energy/003a_res/index.shtml Energy-saving tips from the hideously stricken Pacific Gas & Electric.
"The lights stayed on in 2000, but just barely.
"This was the year Californians stopped taking energy for granted. The state's failed attempt to deregulate the electricity market resulted in a surge in wholesale power prices, a tripling of some consumers' bills and financial devastation for the two biggest utilities.
"But until the supply of electricity can meet the state's rapidly growing demand == something that will not happen for years == it seems clear that California's energy crisis will get worse before it gets better. (((He said "years," folks. Wow.)))
"'Every possible thing that could go wrong has happened,' said Michael Worms, an energy-industry analyst with Gerard Klauer Mattison in New York. 'It's actually pretty amazing.' (((It's definitely amazing, but energy problems can get a lot worse than this. If this systemic failure happened in a state without a Mediterranean climate, the people would die in droves.)))
"'This is the ghost of summers future,' Michael Shames, executive director of the Utility Consumers' Action Network, predicted at the time.
(((Great soundbite, Michael! This aptly-named Shames guy has got a nice California Crisis website. Kind of a nice, crunchy, homemade ripped-off consumer design look- and-feel there.))) Link: http://www.ucan.org
(((On his unfortunately garish website, Michael Shames also offers a fabulously boring 20-page document that explains in painful detail why California ran out of energy, and why it can't get any merely by being politically correct. Here it is:)))
(((I'll summarize this document later. In the meantime, it's back to feeling California's pain via the SF Chronicle and reporter David Lazarus.)))
"On the one hand, chronic power shortages threatened to derail the state's red-hot economic expansion. (((Net infrastructure goes broke.)))
"On the other, the leading utilities were warning of possible bankruptcy if they were left holding the bag for billions in extra expenses. (((Power infrastructure goes broke.)))
(((This crisis should not be split into two issues. The 21st century century solution is network convergence. The digital nets should eat the voltage nets and make them much less filthy and clumsy. Not much sign of this lovely result so far, though. California's hackers think their voltage comes from Oz. Too bad it comes from Texas.)))
"Wall Street, meanwhile, started taking notice. (((Uh- oh.)))
"'No one wants to hold stock in a company that is subsidizing its customers,' said Paul Patterson, an analyst at Credit Suisse First Boston in New York. 'If PG&E has to swallow this loss, investors will run in droves.'
(((So on the money front, it's Wall Street financiers versus NIMBY-obsessed California consumers. These two power-groups can't get at each other directly; they'll have to fight by proxy, ripping the public services to shreds.)))
"PG&E placed its power-related debt at almost $5 billion and said it was losing an additional $1 million an hour. (((An impressive burn-rate even in California.)))
"'The credit situation is getting much tighter,' said PG&E's Pruett. 'There will come a time when we won't be able to buy power for people. This is going to happen more sooner than later.' (...)
"They have chosen to ensure unconscionable profits for the pirate generators and power brokers who are gouging California consumers and businesses,' the governor said. (((That would be California Governor Gray Davis, coining the exotic 21st century term "pirate generators." How slashdot of him. And where's that money going? If it goes anywhere besides a pile of deficits, it'll go to the people who sold fossil fuel to California.)))
"In fact, industry insiders estimated that Californians had paid about $10 billion in extra electricity charges since prices spiked in the summer. (((Ten billion is big money, but there's much bigger money in the debts the Californians haven't paid. Instead, they've stuck the utilities with the tab.)))
"'This is one of the highest transfers of wealth from people in this state to those outside the state in history,' said Mindy Spatt, a spokeswoman for The Utility Reform Network in San Francisco."
(((Some people coin great soundbites. Some people == dirty, smog-covered Southerners, mostly == produce and ship energy. They have the Golden State over a barrel, OPEC-style. California's beggars can't be choosers, but that doesn't mean they have to be polite about it.)))
"The Confederate Cartel's war against California
"The current war over electricity is a war over the future of California.
By Daniel M. Berman
"The Confederate Cartel of Southern, Enron, and Reliant is holding California for ransom and looting it dry. (((Southern, Enron, and Reliant sell natural gas. Californians have no other suppliers.))) There's no doubt Pacific Gas and Electric will try again to push through a huge percentage rate increase(...). And the bounty will go to holding companies in Texas and the Carolinas, giving them more cash to buy out PG&E Corp. and Edison International. (((Buying California with the cash from its own gullibility! New Rules for the New Economy.)))
"Attorney Jason Zeller, testifying for the normally mild- mannered Office of Ratepayer Advocates, told the commission on December 29 that 'this enormous transfer of wealth ...[is] ... the kind of thing that nations have gone to war over.' (((Good luck going to war with no energy, fella. Empty fuel tanks, busted supply lines.... the kind of crimp in one's style that defeated Erwin Rommel.)))
"Is the threat of a Confederate takeover of our energy future for real? Look what has happened to California's biggest bank and biggest telephone company in the past five years: the Bank of America is now owned by a bank holding company based in North Carolina, and PacBell is now owned by SBC Communications, Inc. out of Dallas. High electric rates will also drive business out of California to the benefit of Texas and the Southeast, the bedrock of Republican support. (...) Will President George W. Bush, who believes 'the free market' will solve our electricity problems, oppose further takeovers by hostile interests?" (((These must be rhetorical questions. Oh yes, the Texan Peril is at hand == and they've got the White House. Time for a serious policy re-think. The Confederates don't lack customers, so as far as Californians are concerned, it's pay up or sit in the dark. Is it too late to surrender and beg abjectly for mercy?)))
(((Okay, so much for the extortionate profits in fossil fuel. Where's the political money going?)))
"WHAT'S THE ISSUE?
"The U.S. electric industry is undergoing a sea change in the way it delivers electricity to millions of households and businesses nationwide. The $220 billion industry, which has been called the last great government-sanctioned monopoly, is slowly but surely being deregulated and opened to competition, giving consumers the power to choose their electricity provider in much the same way they choose telephone carriers. (...)
"As talk of national electricity deregulation intensified in the 1990s, electric utilities == not surprisingly == increased their political contributions to candidates and parties. In 1992, utilities contributed a total of $5.4 million in individual, PAC, and soft money contributions. That figure nearly doubled to $9.5 million in 1996. That figure could double again when the final statistics for the 2000 election cycle are known.
"The strongest area of growth in political giving from electric utilities has been in the form of soft money. In 1992, utilities contributed just $556,000 in unlimited, unregulated soft money to the Democratic and Republican parties. By 1996, soft money contributions increased by more than six times to $3.6 million. The industry's soft money contributions more than doubled in the 2000 election cycle to approximately $8 million. (((That's still peanuts when you're losing a million dollars an hour. The utilities have been harpooned and they are bleeding soft money. Political fundraisers are standing around with buckets. You think they're going to patch up that $220 billion whale any time soon?)))
"It seems that every major group within the electric industry is pouring money into political activities. In fact, there's so much money being thrown around that some observers say Congress has little incentive to resolve the matter quickly. (((A very Russian situation here == crooked pirates feasting indefinitely on the bleeding remnants of the state-supported economic sectors.))) Lobbyists, too, are reaping the benefits of the issue. One lobbyist even called it the 'two-Lexus bill,' reports CQ Weekly. (((A Lexus goes pretty cheap these days, what with that dotcom crash in California.)))
"The undisputed lobbying leader in this issue is the Edison Electric Institute, which has spent tens of millions of dollars lobbying Congress on behalf of large investor-owned electric companies. (((Edison Electric Institute are merely the biggest among a vast swarm, but just so you'd know.))) (...)
"And then there are the advertisers. As any Congressional staffer or lobbyist knows, publications aimed at Congress have been filled with ads from companies and groups staking out positions on the debate over electricity deregulation. These groups include Americans for Affordable Electricity, a coalition of large-scale business consumers of electricity; Citizens for State Power, a conservative coalition backed by investor-owned electric utilities; and the Electric Utility Shareholders¹ Alliance, a coalition of cooperatives, investor-owned utilities and labor interests. (((Plus a swarm of Greenhouse denial freaks such as Greening Earth Society and Global Climate Coalition. It's not surprising to peel up the lid and find a bunch of Viridian class-enemies hard at work here.)))
(((Money talks, soundbites walk. So here's the executive
summary: Silicon Valley down, natural gas marketing
Thing. Sue your heads off in the dark, Californians. If there's any business entity politically covered in an Administration run by two Texan oil men, it's Texan energy companies like Reliant and Enron.)))
(((So now you know where the money went. For extra credit, here's a long, rather technical explanation of where the voltage went. I'm saving all this for last, because these stark facts of life are so boring that even the California Legislature couldn't handle them. If California's power elite had been adding up the watts, they would have known they were coming up a cropper; but since they didn't bother to do that, they'll have to fingerpoint, instead.
(((This California energy crisis has market manipulation involved. Of course it does. There are no free markets in fossil fuels: OPEC is a cartel. Calories aren't bits. People die to get fossil fuel; it is the biggest, toughest, bloodiest business in the world.
(((But that's not the whole problem. If politics could trump engineering, then an interstate legal war on "Confederates" would turn California's voltage back on. It won't, because it can't. Justice comes with a blindfold and a balance, not a generator.)))
"WHAT HAS CAUSED CALIFORNIA'S ENERGY CRISIS
"(...) It is fair to say that Murphy's Law has controlled almost every aspect of electric services == from generation to delivery, anything that could have gone wrong HAS gone wrong.(...) The energy crisis will disrupt the lives and economic well-being of Californians for at least the next four years.
"We Allowed Ourselves to Run Out of Electric
Generation Capacity. California failed to build renewables
and cogeneration (...) while relying on out-of-state power
that turned up missing this summer.
"We Allowed The Natural Gas Market to be Cornered. Lax
federal and state regulation led to market manipulation by
the natural gas pipelines and the energy marketers who
control pipeline capacity.
"We Overlooked the Interaction of Natural Gas &
Electric Markets. Regulators failed to recognize the
interaction between the natural gas and the electric
generation markets. When one is out of balance, the
other market breaks down as well.
"We Tolerated Lazy Regulation. The movement to deregulation served as a convenient excuse to reduce regulatory oversight and authority, to the detriment of the competitive energy markets that were supposed to have been formed.
"How We Ran Out of Electric Generating Capacity
"In 1996, when the state Legislature passed the electric restructuring law (AB1890), the legislators were told that California had plenty of power in the near term, but that new power would need to be built. The theory, at that time, was that the private market would see the need for new power plants and would be able to deploy these new plants cheaper and faster than under regulation.
"In 1995, the California Energy Commission issued its Electricity Report 94. It forecast that California had plenty of power through 2001. It predicted reserve margins in 2001 in the range of 21-23% for PG&E and Edison, when only 16% was needed == in other words, power surpluses of about 2000 MW between the two companies.
"However, that rosy assessment relied on a number of resources that, when push came to shove, were not there:
"Nine hundred megawatts of renewable and cogeneration capacity (684 MW Edison, 246 MW PG&E) to be acquired (...) were never purchased.(...) The utilities, particularly Edison, got FERC (((FERC are the feds))) to kill the auction as discriminatory against other power generators. We ended up spending $90 million of ratepayer money (...) to bail out the utilities for killing these contracts and didn't get a single kilowatt-hour. (((California's utilities didn't want to build expensive, complicated green stuff, so they sidestepped the work. That capacity would be mighty handy right now. And mighty profitable.)))
"Nearly 2300 MW of uncontracted 'spot' capacity (1700 MW for PG&E and 588 MW for Edison) from Northwest and Southwest sources who have proven that (1) when push comes to shove, they have very little energy to sell and (2) were demanding cash on the barrelhead to sell what little they had (...). ((((1) The kindness of strangers. (2) Fossil fuel price spikes are for everybody. When there's an OPEC line around the block, nobody's your pal.)))
"Over 2000 MW of DSM that the utilities had no intention of ever acquiring. PG&E and Edison were projected to be acquiring 100-150 MW per year each, at the same time as they were cutting their budgets in response to performance-based ratemaking incentives and acquiring only 40-70 MW per year each. (...) (((Don't pretend you'll build 150 megawatts, and then build just 40 because that looks a whole lot better on this quarter's report.)))
"One hundred megawatts of non-existent line loss savings from interruptibles, because the CEC forgot that most of them were at transmission voltage, not secondary distribution. (((Don't blow stuff off through sheer technical ignorance, either!)))
"Add up all of these overestimates and the 2000 MW surplus becomes a 2000 MW deficit, with reserve margins in the 8- 10% range. (...) These actions set the stage for the artificial shortage of generation that has hit the western United States in 2000."
(((That long, eye-glazing recitation doesn't even count the stark effects of California's suddenly booming demand for energy, due to Greenhouse heatwaves and, well, the Digital Gold Rush. "Gold Rushes Finish Ugly," as they say; and lo and behold, the Golden State of California is four thousand megawatts and forty billion dollars short. Californians have two basic choices here: whine all the way down, or invent their way out of it. Every crisis is an opportunity, are we right? Is this a new economy == or was it a mere "New Economy?" Good luck, California! We'll be watching!)))
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