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The California Energy Crisis: A Brief Summary of Events

Editor's Note: This special issue of EETD News examines the California energy crisis of 2001, and research and development underway at the Environmental Energy Technologies Division of Lawrence Berkeley National Laboratory focused on helping to solve the crisis, both in the short and long term.

The energy crisis in California has been in the news since 2000, when rapidly rising energy prices in the San Diego area first hit the headlines. Described as the consequences of the failure of the state's experiment in utility restructuring, the crisis, characterized by high wholesale prices of electricity, increasing frequency of Stage I, II, and III power alerts, and rolling blackouts, spread to the rest of the state in 2001.

Forced to buy expensive wholesale power on the spot market, California's investor-owned utilities rapidly acquired unsustainable levels of debt, while being forbidden by law from passing along the high costs of electricity to their retail customers. During the winter months of 2001, natural gas prices also spiked, sending retail gas bills through the roof. It was during the winter months that the state began experiencing power alerts, and rolling blackouts, or the frequent threat of them.

In April 2001, Pacific Gas and Electric (PG&E), northern California's investor-owned power utility and one of the largest utilities in the United States, now billions of dollars in debt, declared bankruptcy. Meanwhile, Southern California Edison (SCE) teetered on the edge of the same, forcing the state government's authorities to wrestle with complex solutions. The state's Power Exchange, which had been set up under restructuring legislation as the spot market for utilities and power generators to buy and sell power, closed down. The California Independent System Operator (CalISO) bought increasing amounts of power to keep the state supplied, and the electrical grid balanced.

However, a combination of short-term problems kept sufficient power from being available: they included larger than anticipated plant shut-downs, and a record dry year in the Pacific Northwest, which has traditionally sold summertime hydropower into the California market. By this time, a number of state and federal authorities, including the California Energy Commission (CEC), the State legislature, and the State Attorney general's Office, were investigating whether the causes of plant shutdowns, which were running at higher levels than at the same time in previous years, were in fact for legitimate maintenance—although questions about plant shutdowns were being asked as early as the fall of 2000.

With the failure of the Power Exchanges, and the CalISO buying more than half of the electricity used in the state, the state moved to secure as much power through long-term contracts as possible, with the California Department of Water Resources acting as buyer. The CalISO was originally intended to oversee and balance the electrical grid. To help provide revenue for the state's indebted utilities, the California Public Utilities Commission (CPUC) approved a substantial retail electricity rate increase, which would become visible in most customers' June bills, ranging from 20 to 30%, even as the state legislature worked on bailout plans for PG&E and SCE.

The state also moved to speed the approval of new power plants—which will not impact the energy problem substantially this year because of the length of time it takes to build them—and implement a cornucopia of programs to encourage energy conservation and efficiency to avoid rolling blackouts. One in particular, the Governor's 20/20 Rebate Program, provides a 20% rebate on electricity bills to customers who reduce their energy use by 20% during their June through September billing months.

At this writing, the programs encouraging conservation and efficiency were having a substantive effect in reducing the magnitude of the crisis. According to CEC statistics, in May 2001, Californians reduced monthly peak demand by 10%, 14% in June, 11% in July, and 9% in August, compared to the previous year. Energy use declined by 11% in May, more than 12% in June, 5% in July, and 7% in August. More than 30% of utility customers in California have qualified for rebates under the 20/20 program. As the core summer months pass, the state is getting an assist from cooler than normal temperatures, which are reducing air conditioning loads; a declining economy has also reduced peak and energy demand. State authorities have been thanking Californians for their conservation efforts, to which they attribute in part the sharp drop in wholesale electricity prices since June.

Although California's power situation is unique in certain ways, the possibility of energy shortages elsewhere in the U.S. is not. The U.S. Department of Energy has warned that other regions are facing tight energy supply situations and possible blackouts. Solutions applied successfully in California should interest energy managers in other parts of the country.

Berkeley Lab's Environmental Energy Technologies Division has been developing energy-efficient technologies and practices and studying end-use energy consumption in the United States since the mid-1970s. Indeed, the Division was created in part as a response to the first energy crisis brought on by the oil shocks of the 1970s. For more than 25 years, Division researchers have been developing, demonstrating, and helping commercialize energy-efficient solutions that help reduce energy bills, emissions of air pollutants and greenhouse gases, and the nation's dependence on energy imports.

This special issue of EETD News explores some of the work of the Division that is helping California deal with its energy crisis, from web sites developed as a short-term response to the crisis, to ongoing work that increases the efficiency of energy use in residences, commercial buildings and industry, and how that work also helps the rest of the nation.

California's Electricity Market
Generation (1999) 276,000 GWh
Utility 130,000 GWh
Non-utility 96,000 GWh
Imports 49,000 GWh
Consumption (2000)
Peak load 53 GW
Consumption 264,000 GWh
Retail electricity market value $20 billion
Customers (2000) million
Residential 11.4
Consumer 13.1

Source: California Energy Commission

— Allan Chen

For more information, contact:

  • Allan Chen
  • (510) 486-4210; fax (510) 486-5394

 

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