Energy Production and Use in California

Source: California Energy Commission

Source: California Energy Commission

California Electricity Use (Average MW) Source: California Energy Commission

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

Marginal Cost of Natural Gas per MWhr

Natural Gas Spot Prices in California Source: Enerfax.com

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

Long Term Contracts Entered Into By California Expected Price Range with $3 - $5 Gas

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: