Energy Production and Use in California

2001 2002Source: California Energy Commission

http://www.energy.ca.gov/html/energysources.html

California Electricity Generation (GWhr)

0

50,000

100,000

150,000

200,000

250,000

300,000

1983

1984

19

85

1986

19

87

1988

19

89

1990

19

91

1992

19

93

1994

19

95

1996

19

97

1998

19

99

2000

20

01

2002

Imports

Solar

Wind

OrganicWaste Geothermal

Gas

Oil

Coal

Nuclear

Hydroelectric

Source: California Energy Commission http://www.energy.ca.gov

California Electricity Use (Average MW)

Source: California Energy Commission

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Average MW

Residential Commercial Industrial Agricultural & Water Pumping Other

Recent Problem: The California Energy Crisis

The Dual Crisis in California• Electricity Crisis

– Inadequate Supply–High Wholesale Prices

• Financial Crisis–Draining all Financial Assets of Utilities–PG&E Bankruptcy–SCE Settlement after Almost Bankruptcy–Decimation of State Budget

Non-Firm Peak Power Prices. Average of High and Low for Week Source: Western Price Survey

$0

$500

$1,000

$1,500

$2,000

$2,5004/

1/20

00

5/1/

2000

6/1/

2000

7/1/

2000

8/1/

2000

9/1/

2000

10/1

/200

0

11/1

/200

0

12/1

/200

0

1/1/

2001

2/1/

2001

3/1/

2001

4/1/

2001

5/1/

2001

6/1/

2001

7/1/

2001

8/1/

2001

9/1/

2001

10/1

/200

1

Week Beginning Date

$/MWh

Mid-ColumbiaCOBPalo VerdeCalifornia PXCalifornia NP 15California SP 15

$0

$100

$200

$300

$400

$5004/

1/20

00

5/1/

2000

6/1/

2000

7/1/

2000

8/1/

2000

9/1/

2000

10/1

/200

0

11/1

/200

0

12/1

/200

0

1/1/

2001

2/1/

2001

3/1/

2001

4/1/

2001

5/1/

2001

6/1/

2001

7/1/

2001

8/1/

2001

9/1/

2001

10/1

/200

1

Week Beginning Date

$/MWhMid-ColumbiaCOBPalo VerdeCalifornia PXCalifornia NP 15California SP 15

Non-Firm Peak Power Prices. Average of High and Low for Week Source: Western Price Survey

$0

$100

$200

$300

$400

$500

$60010

/1/2

000

11/1

/200

0

12/1

/200

0

1/1/

2001

2/1/

2001

3/1/

2001

4/1/

2001

5/1/

2001

6/1/

2001

NG Marginal Costs ($/MWhr)

PG&E Citygate at 6.8 MMBtu/MWhPG&E Citygate at 10 MMBtu/MWh

Marginal Cost of Natural Gas per MWhr

Natural Gas Spot Prices in California

Source: Enerfax.com

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

$6010

/1/2

000

11/1

/200

0

12/1

/200

0

1/1/

2001

2/1/

2001

3/1/

2001

4/1/

2001

5/1/

2001

6/1/

2001

$/MMBtu PG&E Citygate Price Southern California Border Price

$0

$100

$200

$300

$400

$500

$60010

/1/2

000

11/1

/200

0

12/1

/200

0

1/1/

2001

2/1/

2001

3/1/

2001

4/1/

2001

5/1/

2001

6/1/

2001

NG Marginal Costs ($/MWhr)

Southern California Border at 6.8 MMBtu/MWh

Southern California Border at 10 MMBtu/MWh

Marginal Cost of Natural Gas per MWhr

The Dual Crisis• Although all municipal utilities and investor-owned

utilities (IOUs) throughout the West faced the electricity crisis, on the California IOUs experienced the financial crisis.

• Only these were under direct regulatory control of the California governor and the CPUC.

• Two regulatory rules forced California IOUs into a financial crisis. IOUs were precluded from using long-term electricity purchase contracts to protect themselves from wholesale price spikes. Once wholesale prices sky-rocketed, Governor Davis and CPUC refused to allow retail price increases needed to keep investor-owned utilities financially viable and to encourage energy conservation.

Current Problem: High Prices of Delivered Energy

Power Costs (cents/kWh)

Cal Rates

US Average

Western States Average

Residential

12.1

8.5

7.5

Commercial

13.3

8.0

6.6

Industrial

8.7

4.9

4.8

Source: US Energy Information Agency, Electric Power Monthly

Price/MWhr over time

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

$/M

Whr

Long Term Contract Price Future Prices as of July 2001

Long Term Contracts Entered Into By California

Expected Price Range with $3 - $5 Gas

Annual Rate of Expenditures

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Bill

ions

of D

olla

rs P

er Y

ear

Bond Payments

• $13 Billion Bonds Proposed• 15 Year Payments• 4% to 5% Interest

• Annual Payment for Next 15 years:

$1.2 Billion Per Year

The Challenge: Adequate Electricity Supplies for the Future

Policy Framework Advanced by Arnold Schwarzenegger

DuringCampaign

Arnold Schwarzenegger’s Announced Energy Program• Create a coherent energy strategy to stimulate private

investment; align the state energy agencies to support that strategy

• Reform the wholesale power market to ensure stable supplies• Reform retail power markets to ensure competitive prices and

better demand response• Assure adequate electricity generation capacity• Assure adequate and diverse fuel for power generation • Support all cost effective conservation and efficiency • Increase the reliability of the transmission grid • Support and encourage appropriate energy research and

development • Explore ways to lower the cost of California’s overpriced

power purchase agreements

Source: http://www.joinarnold.com/en/agenda/