No New Generation as of Summer 2000
As of the Summer of 2000, however, no projects had completed construction. The absence of new generation was an extremely important contributor to the volatile prices in the Summer of 2000. The Department of Market Analysis of the California ISO issued a special report on market performance in May and June of 2000. It concluded that:
  In summary, the major cause of high wholesale prices this summer has been the absence of new investment in generation and transmission to meet the growth in demand over the past decade.

The special report observed that California's electricity consumers have little ability to respond to higher prices. With a lack of price responsiveness:
  the ability of suppliers to exercise market power under tight supply conditions cannot be limited by competitive market forces. In this situation effective mitigation of market power must be accomplished through rules, procedures and incentives designed into the structure of the markets themselves. The funamental solution to mitigate this market power is to create ways for consumers to respond to increasing prices and accelerate entry to the market by new suppliers.

The ISO report discusses ways to create consumer price responsiveness, but it does not explain what might be be done to "accelerate entry to the market by new suppliers."

 What Should we Expect for the Summer of 2001?

Kahn and Lynch, August 2000:
As the demand for electricity continues to grow, planners are naturally anxious about market conditions in the Summer of 2001. An example appears in the report to Governor Davis by the Chairman of the Electricity Oversight Board and the President of the Public Utilities Commission (Kahn and Lynch 2000). They observed that "investment in generation slowed when regulators put the risk for building generation on investors" (p. 36) and that "no government body is compelling power plant construction" (p. 51). Looking to next summer, they (p. 4) cite ISO information to estimate the maximum available generating capacity in 2001 at 45,602 MW --only 37 MW higher than the maximum generation in the previous year!

The 37 MW seems quite small, since the PUC is aware that "almost 3,000 MW of additional generating capacity have been approved and are under construction" (p. 55). Perhaps the low value is due to the definition of "2001" as the start, rather than the summer of the year. The assessment changes dramatically when they look to the "2002" and "2003." Based on ISO information, Kahn and Lynch expect maximum generating capacity to increase by 4,409 MW in 2002 and by 12,850 MW in 2003.

CEC, November 2000:
A different view of new generating capacity for next summer is given in the November forecast by the California Energy Commission (CEC 2000). Page 4 lists "firm new additions" of 1,849 MW. The list includes two projects shown on the "Under Construction" page on this website:
 
  • Sutter: 500 MW "under construction" as of Summer of 2000; rated at 467 MW for summer use in the CEC forecast.
 
  • Los Medanos: 500 MW "under construction" as of Summer of 2000; rated at 467 MW for summer use in the CEC forecast.

These two projects account for around half of the 1,849 MW of "firm new additions." The other half comes from some renewable resources, higher output from existing qualifying facilities and from a large number of combustion turbines or CTs.
  CTs:
  Combustion turbines are peaking units. They have shorter construction lead times and lower capital costs, but they do not burn natural gas as efficiently as the combined cycle units. Their heat rate could be around 9,100 BTU per kwh (compared to 6,800 for a CC). The higher heat rate means higher fuel costs and more air pollution. CTs are not listed in the tabulations (i.e., "Under Reivew," "Under Construction") on this website. (A CEC news release describes 499 MW of peaking units placed on a fast track review process.) There are eight CTs in the CEC forecast, one large CT rated at 285 MW and seven CTs rated at around 40 MW each. Their total summer rating is 588 MW.

The press release accompanying the CEC report (see Dow Jones news service) says that California's electricity demand is growing at around 2%/yr. Since the California system is around 50 GW, this growth amounts to around 1 GW/yr. If California does see 1,849 MW of firm additions, planners might anticipate that the Summer of 2001 could be less tight than the Summer of 2000. The CEC report (available from http://www.energy.ca.gov) is comprised of 6 pages of tables. There is no text to explain or interpret the tables. For interpretation, one might turn to the news services. According to the Dow Jones news service, for example:
  As expected, the California Energy Commission said Monday the state would have enough power to meet its electricity demand next summer unless California experiences extraordinarily hot weather. "With new resources coming on-line and new conservation measures taking effect, next summer looks better than expected, if we manage our resources properly," said Steve Larson, the Energy Commission's executive director.


CEC Jan 25, 2001 Update:
Information from the CEC Website from Jan 25, 2001 suggests that three plants with a combined capacity of 1,320 MW could be completed in time for the summer of 2001.

References

California Energy Commission, "Summer of 2001 Forecasting Electricity Demand and Supplies," report P300-00-006 of the Electricity Analysis Office, Nov 2000.

California ISO, Department of Market Analysis, Special Report, "Report on California Energy Market Issues and Performance: May-June 2000," August 10, 2000.

Michael Kahn, Chairman, California Electricity Oversight Board and Loretta Lynch, President, California Public Utilities Commission, "California's Electricity Options and Challenges," report to Governor Gray Davis, August 2, 2000.