Electric Crisis Shocks California

0 Comments | Insight on the News, Feb 26, 2001 | by John Elvin

The Sierra Club environmentalists told the leaders tasked with assuring that California would have plenty of electric power that their objective was to shut down the state.

As the lights go out in California, thanks to the Democratically controlled Legislature's flawed deregulation scheme, the search for solutions is under way.

Although other states, such as Pennsylvania and Texas, have deregulated without incident by providing incentives to increase production facilities, the California plan concentrates on guaranteeing retail rates while freeing wholesale prices to increase with demand. And while the industry was eager to sign up when it looked like wholesale prices would be low, the unexpected upward zoom in demand has raised the wholesale price of spot electricity, set by bidding in the daily market, to levels that are threatening to bankrupt some companies.

Yet instead of taking steps to encourage the building of private power plants, the California Legislature has been discussing solutions such as "socializing the peak" -- building government plants that would come online when demand is greatest. But it is quite possible that an educated public might not want to foot the enormous bills for government power plants, particularly since they already are paying the nation's highest electricity prices. And there is talk of socializing the industry's debts also, by approving bond issues to bail them out. But the real problem, say conservative critics, is that California has a built-in aversion to new private plants as a result of many years of ecological proselytizing by environmental groups. The crisis is the result of California ecological dreaming.

Industry sources say modest reductions in environmental constraints would encourage private industry to build its own new production facilities, but California has been unwilling to make accommodations so no new plants have been built in years. Apparently, "modest" means one thing to industry and quite another to regulators and activists. That attitude goes back a long way in California. Looking into it, Insight made a surprising discovery.

As it turns out, the stage for California's current crisis was set many years ago in a confrontation between a captain of the power industry and a handful of leaders of the environmental-activist group, the Sierra Club. It was a meeting rife with possibilities for the future; instead, it ended on a sour note that echoes in the adversarial relationship between environmentalists and the power industry that exists today.

The captain of industry was William R. Gould. His name may not bring a roar from the grandstands on today's playing field but, in his time, he was a world-class mover and shaker in the energy field, a Kipling-quoting visionary and innovator, a pioneer in the use of new technologies. He retired as chief executive officer of Southern California Edison in 1984 with a huge bouquet of laurels upon which to rest. There are university lectures named after him and medals given in his name.

The industry as Gould knew it in the early days is difficult to imagine, given the complexity of today's power market. In those days, a consumer had to be in some proximity to a generating plant in order to obtain electricity. Today, a mighty web of transmission lines can shoot power border to border, or from Canada to Mexico, for that matter. In the early days, Gould looked at the huge hydroelectric plants producing excess power in the Northwest during the spring runoff, and at the plants far to the south that had the capacity to generate extra power overnight, and he had a grand idea: He envisioned what became the Pacific power grid.

Gould would assert that the effort was a team endeavor, a "we" thing, but his leadership is well-documented. The result -- so accepted today that disruptions in its functioning cause panic -- was that power could be shipped from distant points to accommodate peak demands as needed. This was a remarkable accomplishment. Gould's work served as the model for the nation. He changed an industry that had advanced little since the days of Thomas Edison. Having been, as a power-company executive, the target of a press sympathetic to the emerging environmentalist propaganda machine, he was delighted to find himself hailed for once as a "courageous maverick."

The 1960s and 1970s were a tumultuous era in many ways, prominent among them being the emergence of a powerful environmental movement. This movement claimed to be interested in alternatives to generating plants fired by coal and oil. Gould, the courageous maverick, had at the same time directed his company's efforts toward development of renewable energy sources. He asked his engineers and scientists to "carefully examine every emerging technology for producing, transmitting and distributing power, including those of nontraditional methods." In 1982, Southern California Edison was awarded the John and Alice Tyler Ecology-Energy Prize for its commitment to developing alternative energy sources. One might think it was a match made in heaven: Gould and the environmental movement.