California CapitolWeek 3/23/01
Energy Crisis Power Gouging - Green Power
((Jack))
Just ahead, rolling blackouts return…
Californians are once again left in the dark as idled power
plants and lack of payments to small suppliers drop energy reserves to
critically low levels.
((Melissa))
And threats of summer blackouts and higher electricity bills
have many consumers thinking green…
Green energy that is…
Begin
Soundbite
((Cole
Newland, Contractor/Century Homestead))
It’s generating as we speak on a sunny day about 8,000
kilowatt hours per year.
End
Soundbite
((Melissa))
Hello I’m Melissa Crowley.
((Jack))
And I’m Jack Kavanagh.
Those stories, plus an investigation into
whether power generators have unfairly profited at your expense.
((Jack))
Thank you for joining us.
Spending to keep the lights on continues.
Without more details on how the governor
is spending state money, some lawmakers want to stop the bleeding before the
budget surplus runs out.
Melissa Crowley will have more on that
later.
But first, summer-like weather and a drop
in supply forced black outs this week…
extending from Northern California and for the first time,
to Southern California.
While consumers are looking ahead to the
threat of summer blackouts, some attention is turning back to why the situation
has become so bad.
A number of federal and state agencies are looking into whether power generators have
taken advantage of consumers during our energy crisis.
The focus is market manipulation . . .
such as shutting down plants to reduce available power, which in turn, drives
up prices.
A new state senate committee is looking
into the prices charged by power producers.
Begin
Soundbites
((John
Burton, Senate President Pro Tempore))
I think it’s incumbent upon us to know how much of that is
money that is really legitimately money coming to the generators and how much
of that was basically gaming the system.
((Jan
Smutny-Jones, Independent Energy Producers))
We need facts, fairness, and accountability. I would hope that this committee is going to
be fair and has not, in fact, already made up its mind. In fact, we are on a fact-finding
investigation, not a witch hunt.
End
Soundbites
DISCUSSION
#1
((Jack))
Joining us to for more on these allegations of power
gouging:
Gary Ackerman with the Western Power Trading Forum that represents
31 in and out of state power producers.
And Lenny Goldberg, with The Utility Reform Network or
“TURN”.
Thank you both for joining us.
Gary, let me start with you. There seems to be a preponderance of criticism that’s
growing. The front page story on the
“LA Times”—we’re taping this program on Thursday morning—there have been
detailed studies in the “San Francisco Chronicle.” The Federal Energy Regulatory Commission is raising questions;
The California Public Utilities Commission is raising questions; it seems like
everyone is pointing the finger of blame with allegations of overcharging by
the generators.
((Gary Ackerman,
Western Power Trading Forum))
Yes, Jack, and the key word there is “allegation.” What they’re looking for is some evidence to
back up the, in some cases, fantasy that the people I represent are meeting in
a room just like this with beer and pretzels and figuring out who’s not going
to run today so that our competitors can make more money. It is absolute craziness in terms of some of
the allegations that we’ve heard.
However, it is appropriate for regulators what any person or entity
might suspect is wrongdoing, and if high prices are a signal of wrongdoing and
people are concerned, then they have a right to investigate. As the spokesman from the taped piece before
said, a fact-finding mission is an appropriate thing for regulators to do.
((Jack))
What do you think, Lenny?
Is there collusion? Is there
some sort of gaming of the market going on?
((Lenny
Goldberg, TURN))
Absolutely, but it doesn’t have to mean people sitting in a
room deciding on whether they do or not.
First of all, there are all sorts of anecdotal things like megawatt
laundering where a day ahead they send it out of state, and then they sell it
to California at much higher prices the second day. There are cases where there were reliability contracts where one
unit or company shut down and another company ran in and sold to the market
because there was a renege on the reliability contract, but there is a
systematic market failure here, so you don’t have to be collusive to rip off
the state of California. You just have
to participate in a market that’s fundamentally broken. A year ago last May, there was a big price
spike, and then in June they went up, and they have never gone down no matter
what the supply and demand situation has been.
At that point, we have a broken market.
I’m sure that they can find all sorts of places where they can point to
gaming and collusion, perhaps. I will
say that I’m not sure about that, but what I will say that I am sure of is that
you can be dumb as a post and make money in this market because it is not a
functioning market, and so the real failure here is the federal energy
regulatory commission who have completely abdicated. They’re throwing up their hands and doing chump change
investigations with all kinds of things like, “Well, it’s only gaming in a
stage three.” Well, if the price is
four hundred dollars and it’s not a stage three and there’s plenty of supply out
there, what’s going on?
((Jack))
What’s going to come of these investigations, Gary?
((Gary
Ackerman, Western Power Trading Forum))
Probably nothing.
None of these investigations are going to add one megawatt of power
supply this summer, nor are they going to take away one megawatt of demand, and if we don’t do both
of those things this summer, we’re going to have much of what we saw this week,
a great number of rolling blackouts, so I don’t think these investigations are
doing anything but trying to deflect the blame on the people here in Sacramento
who are most responsible for managing this mess. They haven’t done a very good job. I think the people of California understand that very well. The lead story in the “LA Times” pointed to
an ISO study, which by the way the ISO is under the control of people elected
by the Governor. The ISO claims 5.5
billion in excess. Had the number a
half a billion, I might have been concerned.
At five and a half billion, it shows me that they’re scared. They’re scared; they’re scared and trying
desperately to deflect the blame.
((Jack))
So what happens?
We’ve spent down our budget surplus considerably. We could easily spend it all before the end
of the year. We don’t have any money to
buy power. What’s going to happen?
((Lenny Goldberg,
TURN))
Well, we will recover some of that through rates. We will do some long-term bonding. If the solution works that the Governor is
putting together—and this is not a problem created in Sacramento. Gary is fundamentally wrong about that. It’s very difficult; you know, it’s herding
cats in a political situation, and you have the utilities who are not paying
their bills, and that’s one of the reasons that we had the power outages this
week, and who are being fundamentally intransigent about the situation they
brought us to in terms of the negotiations they’re having with the Governor
right now, but the best case scenario is some conservation, so redistributed
generation, some new generation, and I think we have to be prepared for some a
long-term, somewhat stable and regulated situation that is also an expensive
answer.
((Jack))
Yeah, but what happened?
Prior to this week, it looked like the focus was on the long-term
contracts to try to find enough power to get California through the year, then
all of the sudden this week, we’re putting fires out again, trying to get the
lights back on. It’s like we’ve taken
two step forwards and five steps back.
((Gary
Ackerman, Western Power Trading Forum))
Because someone turned up the heat, nature of course, and
then as that occurred and the problem of nonpayment continued, we have
liabilities that are accumulating over time, and the public is not being well
informed or maybe they just don’t want to listen because we know that over half
of Californians believe that there isn’t a capacity shortage right now. There is a capacity shortage. We are in an energy crisis, and that
situation hasn’t changed over the last six or seven weeks.
((Jack))
Is there a feeling out there, and I’ve seen it written in
several pieces in newspapers throughout California, that there’s a perception
among Californians that we’re being gouged by big power companies, so I’m not
going to conserve.
((Lenny
Goldberg, TURN))
You know, I don’t think so.
I think people will conserve.
I’m sure that there is an understanding of the summer shortages, but
when you look at the middle of the winter, and you look at the fact that we’re
using half our capacity day and night, and we’re still paying three hundred
dollars a megawatt hour when last year, at the same time with the same amount
of energy and the same demand, we were paying thirty dollars a megawatt
hour. That’s the sign that the market
is fundamentally broken. We are being
gouged. There is complete market
failure out there, and it’s one thing to conserve with regard to shortage; it’s
another to pay exorbitant prices in a situation where we don’t have that kind
of short supply.
((Jack))
Gary, in the existing market situation, PG&E and Edison
basically spent out all their money.
They ran out of money.
((Gary
Ackerman, Western Power Trading Forum))
Yes they did.
((Jack))
So the state had to pick it up, so what happens when the
state runs out of money?
((Gary
Ackerman, Western Power Trading Forum))
Well, why is that happening in the first place? It’s because the state would not allow the
utilities in prior legislation, AB-1890, to raise rates. Therefore, consumers did not get the message
that this product that they’re consuming is going up in price. Nostalgic economics like Lenny likes to
practice really does not explain how things operate in the real world—
((Lenny
Goldberg, TURN))
You know, that’s just—
((Gary
Ackerman, Western Power Trading Forum))
When prices go up, when costs go up, people will increase the
prices that they charge their customers, when the fundamental facts of life
have not changed.
((Lenny
Goldberg, TURN))
Consumers will recognize that, day to day and moment to
moment, when costs go up, we will have to pay for those costs. There has been some increase in cost, but
prices were set at a rate that was twice was the market was. We paid six and a half cents for all these
years when the market was clearing at two and three cents. The market never went to six cents; it never
went to nine cents. It went from three
cents to thirty cents. That’s not a
market. We’re happy to pay for the
increase in costs. Yes, gas prices have
gone up, there has been a shortage in supply, and a market is supposed to work
in a kind of regular, continuous way.
We’ll pay those prices, we’ll conserve, we’ll get those market signals,
but it is not a market signal. It is a
complete gouging when you go from three to thirty dollars with nothing in
between.
((Jack))
Last question, are we going to have more blackouts this
year?
((Gary
Ackerman, Western Power Trading Forum))
Absolutely. There
are going to be dozens of them I’m afraid, and Northern California is going to
be hit a lot harder than Southern California.
((Jack))
Lenny, last word.
((Lenny
Goldberg, TURN))
We’re hopeful that consumers will
really conserve—
((Jack))
There will be blackouts?
((Lenny
Goldberg, TURN))
There are likely to be blackouts, and I think the drought in the
Northwest will be a major cause of that.
We usually get a lot of our power from the Northwest.
((Jack))
All right, on that note, Gary Ackerman, thank you very much.
Lenny Goldberg, thank you very much.
Just ahead, Can the state keep the power on without draining
the budget?
But first, the threat of more blackouts
and high electricity bills has many consumers giving an energy source its day
in the sun. Melissa?
END
DISCUSSION #1
((Melissa))
Jack, as consumers brace themselves for
summer energy bills, green energy is looking more attractive.
Residential use of solar energy has increased
three-fold since January.
Solar panels are popping up in places
that may surprise you.
GREEN
ENERGY REPORT
Suzanne Ashworth’s home may not look like the typical power
plant, but on average it generates eighty percent of the energy her household
needs…
((Cole
Newland, Contractor/Century Homestead))
It’s a miniature power plant. It’s generating as we speak on a sunny day about eight thousand
kilowatt hours per year.
Contractor Cole Newland helped install the solar,
photovoltaic cells on her roof that actually generate electricity. Suzanne’s choice for the rest of her roof
was just as environmentally friendly…
((Suzanne
Ashworth, Solar Homeowner))
The tires were just too good to pass up. Six different companies in town said,
“That’s really nice, lady, but we don’t do that.
She
found information online and convinced Newland to do the job…
He says
that environmentally friendly energy sources and building materials may some
day be the norm in California. It makes
sense in California…
((Cole
Newland, Contractor/Century Homestead))
I’m old enough that I can remember when attic insulation was
kind of a frivolous extra that they’d add when they built houses, and now you’d
be crazy not to have it under, over, all the way around your house.
As
technology evolved, solar energy has become more widespread…
((Kevin
Boedecker, Anu Power))
Without solar power, solar technology, the technology of the
world would not exist. Satellites are
solar-powered; computers are solar-powered.
Here, solar panels are used to heat the water at Brannan
Island State Park. This water heating
system saves the state on their gas bill and fits in with the park’s natural
environment…
((Keith
Dresbach, Atlantis Energy))
What we see here is one of the sun slates themselves, and here
you can see the solar cells. Each slate
has six solar cells. This is what
generates the electricity.
These new photovoltaic cells don’t heat water, they actually
generate power, but the installation price can be cost prohibitive. On average, between seven to fifteen
thousand dollars per home…
Rebates are
offered by the state energy commission and some utilities to offset some of the
cost…
((Keith
Dresbach, Atlantis Energy))
It takes about fifteen years to pay for itself, but what
it’s doing is it’s generating electricity, so instead of paying the utility
company, you’re paying yourself, and then once the roof’s generated enough
revenue to cover the cost of its purchase, then you’re ahead from that point
on.
Despite cost concerns, companies that install and make solar
panels say there is still a big demand, fueled in part by the current energy
crisis...
((Keith
Dresbach, Atlantis Energy))
We’re seeing a huge increase in interest, and the new
construction market is probably the next market that we’re going to see a huge
demand.
Suzanne says that the initial decision for her roof was to
do something environmentally sound, and now it’s a thrill to see here meter
actually running backwards…
Any excess
energy is sent back to the grid and credited to her account when she needs it…
((Suzanne
Ashworth, Solar Homeowner))
It was a good choice for us.
END GREEN ENERGY REPORT
((Melissa))
About 39 million dollars remains in the solar rebate fund.
Governor Davis has proposed adding
another 50 million.
Rebates depend on how much power a system
generates,
Speaking of money, that brings us to this
week’s at issue, your insider look at what’s happening in the state capitol.
@
ISSUE
((Melissa))
They say, the “devil is in the details,” and so far the
details surrounding state power purchases is a sore point; blackouts aren’t
helping…
Even some Democrats are growing uneasy with the lack
of details of how taxpayer money is being spent, and how much power we’re
getting for that money…
Then there’s concern over the behind closed doors
negotiations to take over state utility transmission lines. Lawmakers say
they’re not part of the equation.
Begin
Soundbites
((Fred
Keeley, Assembly Speaker Pro Tempore))
The patience is wearing, I think, somewhat thin on the part
of many members of the legislature, including members of our house.
((Assemblyman
Dave Cox, [R] Fair Oaks))
Now, the fact of the matter is we’re not moving very
quickly. We’re not acting as if there
is a crisis.
End
Soundbites
((Melissa))
Joining us now, Kevin Eckery, a
public affairs consultant who spent 7 years with the Pete Wilson administration
in their communications
And Democratic political Consultant Gale
Kaufman.
Thank you very much both for being with
us.
Gale, we’ll start with you.
Is this a case where no news is good news? Is that why we’re not hearing much from the Governor’s office
these days?
((Gale Kaufman,
Democratic Political Consultant))
Well, I would like to think. I don’t really know, but I do think we are starting. If you noticed yesterday, or Wednesday, of
this week, the Governor’s office did release some information on the long-term
contracts, and, I think as I and others have hoped, as the weeks progress,
we’ll learn more and more as these deals become more and more finalized. I think it’s a very complicated process and
one that, as your other segment started to indicate, you know, two different
people look at the same set of numbers and come up with two very different ways
to explain what’s going on, and so I think it’s more than just numbers at this
point—
((Melissa))
It’s political?
((Gale
Kaufman, Democratic Political Consultant))
It’s real political.
((Melissa))
And the surprise, I guess, is when you hear from, not just
one side of the aisle but both sides of the aisle. Democrats are now quite frustrated. This week we had Bill Jones come out and say, “Hey, we need more
information.” We had Kathleen Connell
say, “Hey, I’m worried about the money.”
Kevin, what’s your take on this?
((Kevin Eckery,
Public Affairs Consultant))
Well, I think it’s a great example that all politics aren’t
partisan, and this is an exceptionally political furball, if you will, but it’s
not breaking down along Republican/Democrat lines. It’s breaking down along the lines of people who have information
and people who want information, and the jury’s still out on where it’s all
going to end.
((Melissa))
Let’s talk about some of this information. The Governor and the Democrats have been
criticized for their transmission utility buyout plan, but we haven’t actually
heard an alternative proposed by the Republican party.
((Kevin
Eckery, Public Affairs Consultant))
Well, I think right now clearly the leadership focus has to
be on the Governor and the legislature.
I mean, for better or worse, the Republicans are the loyal opposition
here, and I emphasize the word “loyal” because everyone wants to solve this
problem, but the point remains that we need leadership out of the corner
office. We need leadership out of the
legislature, and until we get that, the resolution of this problem is going to
be in the distance; it’s not going to be in the short-term.
((Melissa))
Gale, some of the rumblings that we’re hearing, even from
the Democrats, is that they’d like to know what direction they’re supposed to
go. You know, what legislation are they
supposed to draft? Where should they
head? And they’re looking to the
Governor for that direction, and that’s the source of their frustration. They aren’t being given any clear signals as
to where to go. Is that just the need
to proceed with caution, or is it that there’s just no directive in terms of
where they’re supposed to head?
((Gale
Kaufman, Democratic Political Consultant))
Well, I think it’s more the former. I think you clearly have a situation that is
changing every day, and I think what happened this week with the blackouts took
a lot of people by surprise. I think
there are a lot of people asking why it happened, especially legislators whose
offices started to receive an awful lot of calls saying, “How come we weren’t
made aware of this? Isn’t there a way
if these blackouts are to continue that we can at least have a piece of the
action, knowing, helping, trying to keep tragedies from occurring, in fact, as
lights go out and as people are trying to make due with more problems?” And, so, you know, people are grappling with
a lot of details at the same time. Is
it the small generators? Is it the big
generators? You know, Diane Feinstein,
in the last couple of days, has really brought a whole different picture out
and said, “You know, this could be price fixing.” You know, there’s so much going on, I don’t think there’s a need
to keep it to ourselves. It’s more of
trying to make sense of an issue that is political and really complicated.
((Melissa))
Do we lulled into complacency because it’s energy, energy,
energy, and then we didn’t have any more stage three or stage two days for a
while, and then Monday just came out of the blue? Was it just poor planning?
((Kevin
Eckery, Public Affairs Consultant))
No, I think it’s an illustration of what we’re going to face
as the summer hits. You know, the
“Sacramento Bee” had a very scary graphic the other day on their front page
which showed how much energy we use on a typical summer day which was over
forty megawatts of electricity and how we were in blackouts with twenty-eight
megawatts of electricity. That’s a huge
difference, and I think what we’re seeing is a sort of a precursor and a sort
of need to goose us into action. I
mean, we need to move forward, and we can’t wait until we have more blackouts
and more problems.
((Melissa))
It seems like we’re in a tough situation though. There’s this pressure to move ahead and to
move quickly, and yet, at the same time, to not move quickly and jeopardize the
situation and make it worse. We had one
of the bills that was originally passed that left some loopholes in terms of
how payments will be assessed, so what kind of pressure are lawmakers working
under? You have to move, but yet—
((Gale
Kaufman, Democratic Political Consultant))
Yeah, I think you’ve got incredible pressure. I mean, you’ve got people from the same
party running against each other for different offices. They’re all out there making statements,
talking about how much is left of the surplus, what is going on, and so you’re
really just trying to figure out what has to get done and in what order, and
then you wake up Monday morning with blackouts, and, you know, I seem to think
that that was really suspicious when all of the sudden out of nowhere when it
wasn’t that hot, we couldn’t keep the lights on, and if that isn’t political, I
don’t know what is. So, the question
is, “Which piece of it do you have to do right now?” I think you have to do as much of it as you can before the
summer, and I think that everybody recognizes that, and there are probably a
few more weeks before everybody hits the panic stage.
((Melissa))
And we are in a special legislative session right now. Do you see progress? Are we going to get something done to solve
terrible problems this summer? Most
people agree that there will be some problems this summer.
((Kevin Eckery,
Public Affairs Consultant))
I hope so is the answer.
I mean, I think there is a willingness from all parties to be led to a
solution at this stage because nobody wants to see the lights go out on their
watch, but clearly this has been a crisis in slow motion; I mean, it began last
summer. I mean, the headlines all
around the world about California facing power emergencies, and again, this
week we had blackouts. We have
shortages of electricity at a time when no one in their right mind would ever
have conceived of this.
((Melissa))
So who do we need to hold accountable for this? People are calling for blood from the
PUC. Where do we need to draw the line
where we start holding people accountable and turning things around? Where does that begin?
((Gale
Kaufman, Democratic Political Consultant))
Well, I think you have to hold everybody accountable. One of the things that I was going to
say—and pardon my cynicism again—but I had someone on the Republican side of
the aisle say to me yesterday, “We’re going to sit back and wait. We don’t have to provide any leadership
here. Your Governor is the
leader.” I didn’t like that way of
looking at the situation any better than saying, “Well, yes, he is the
Governor, and we’re all supposedly working on this together and learning as
much as we can,” and the only way this is going to operate is if the
Republicans aren’t sitting behind closed doors and gloating, “We got him
now.” The should actually come to the
table if they’ve got great ideas and bring them forward and let us all accept
them. We can’t say that publicly and
then privately act a different way.
((Kevin
Eckery, Public Affairs Consultant))
I think in some ways that’s a copout. You know, pointing to the Republicans with
their thirty votes, twenty-nine votes in the assembly and fifteen votes in the
senate and saying, “You guys should take charge here.” I mean, that’s a crock.
((Gale
Kaufman, Democratic Political Consultant))
I didn’t say take charge.
I said be part of the solution.
((Kevin
Eckery, Public Affairs Consultant))
But we are part of the solution. Nevertheless, I don’t think that replaces the fact that we need
and we crave and the whole state craves leadership, and you ask, “When’s the
time for finger pointing? When’s the
time for moving forward?”
((Melissa))
To be fair, it was actually Republican Governor Pete Wilson
that actually helped shepherd through deregulation.
((Kevin Eckery,
Public Affairs Consultant))
Oh, absolutely, and it was a unanimous vote in two houses of
the legislature, and so you have a situation where, literally, everybody and
their brother thought this was a good thing.
It was a broad consensus, and so many people thought that this was a
good thing that it is impossible to say that this was Wilson’s problem. In fact, now if you look at what Democratic
commentators are saying, they’re saying, “Now this is Governor Davis’ problem
because he’s had a crisis now for nine months to solve,” and the important
thing is how we solve it, and I think pointing fingers is not the way. I think the only way to move forward is two
thing, clearly—three things. Clearly,
we need to move forward by conservation.
We need to move forward by doing everything that we can to increase
supply of electricity. Third, we all
need to realize that dancing around rate increases has to stop. Californians are going to pay more for
electricity, and if they hear the news sooner rather than later, it’s a case
where bad news doesn’t get better over time.
Let’s just level with everybody.
((Melissa))
Gale, in our final few moments here, let’s let you get in
the last word. Does the Governor need
to come out and just say there are going to be rate increases to get us out of
this mess?
((Gale
Kaufman, Democratic Political Consultant))
I think that’s ultimately going to be part of the
solution. I don’t think that’s the only
solution, though, at this point; I think we’re past that. I don’t think that one simple rate increase
is going to solve the problem, and he said that quite a while ago. I think it is incremental, and I think it
also has to be clear to the public exactly how much of this is their responsibility,
how much is the generators responsibility, and how much of a role had the
federal government played in all of this, and once he lays all that out, the
rate increase, if there is one, will make a lot more sense.
((Melissa))
Gale Kaufman, Kevin Eckery, Thank you very much for being
with us.
We would like your thoughts on our energy crisis.
Are you satisfied with the way the Governor and state
legislature are handling the situation?
Here’s where to send your feedback and find out more about
the state’s energy issues.
WEB
SITE PROMO
((Jack))
You know, Melissa, if you’re going to draw a fence around
the two discussions we just had, the scary part is it doesn’t look like there’s
any solution in the future. It looks
like it’s going to get a lot worse before it gets better, and energy even spilled
into diplomacy, right?
((Melissa))
Yeah, that’s definitely true. You know, President Fox, it would have been his historic first
trip to the United States and California.
It would have been a real opportunity to tackle some tough issues like
immigration. When it was time for
questions, all anybody wanted to know about in both Spanish and English was
energy, energy, energy. “How can Mexico
help? What can we do?” Governor Davis just keeps getting hit with
those kinds of questions. It’s not
going away, something both sides do agree on.
That’s our program this week.
Next week, a special edition, an in depth look
at our
Relationship with our border neighbors following
the first United States trip by Mexican President Vicente Fox.
((Jack))
We’ll take a look at what was accomplished and
what lies ahead and share a personal profile of the Mexican president.
((Melissa))
Until
then, Thanks so much for joining us. We’ll see you next time.