quarterly-report.com Political Commentary by James R. Audet

August 14, 2000
65th anniversary of Japan's surrender to the Allies ending World War II.

The 2000 Energy Crisis has metamorphosed from gasoline to electricity shortages.   This election year, the voters may need all of nine lives to survive until November to record their discontent with the nation’s non-existent energy policy.  First, we are gouged by outrageous heating oil price increases, then gasoline, and now electricity. Where does it end?  Why, with natural gas, of course!  Based on the gruesome record of the last twelve months, natural gas users had better brace themselves this winter.

One solace of this year’s energy debacle crawls out from under a pile of fuel bills.  In five months, the term of nincompoop extraordinaire, Bill Richardson, comes to an end.  Without a doubt, he is the most incompetent Energy Secretary to occupy the cabinet level office created by President Jimmy Carter.

In the Northwest, the wholesale price for electricity on the spot market spiked from a nominal value of 2 - 3 cents per kilowatt-hour to over $1.00 in late June.   Likewise, Midwestern utilities were forced to buy large amounts of high-priced power in June.  Typical prices in the spot market of 1.5 – 3 cents per kilowatt-hour were sublime compared to the $4.00 - $6.00 some utilities paid for power.

The reasons for the atmospheric rise in electric rates: inadequate power generation and transmission and flawed federal and state deregulation.  The immediate remedy for the energy shortage: Turn off a light.

For example, the cost of electric service in San Diego, CA has doubled from a year ago.  The local provider, San Diego Gas and Electric (SDG&E), was the first California utility to divest itself entirely from its power plant holdings under California’s 1996 deregulation act.  Today, all the power SDG&E delivers to its customers is purchased through the California Power Exchange. Although the issues are complex, the dynamics are straightforward.  Since SDG&E no longer owns power generation to buffer price swings, its customers must pay market price for electricity at all times.

This realization has come too late for California legislators that encumbered the state with a nightmarish electric future.  What they failed to realize, yet had counted on, was that power was abundant and freely transferable.  Unlike the sound status of the telephone network when telecommunications was deregulated, the electric generation and transmission network is inadequate to meet peak loads.  Now, with consumers screaming for relief, the California legislature will hold hearings whether to amend, delay, or repeal the energy deregulation bill that has been blamed for the increases.

Nationally, there is a serious shortage of reserve power, and an already overloaded distribution network often handicaps transmission.  At the present time, power is being rationed in accordance with those best able to pay top prices.   According to a report issued by the North American Electric Reliability Council (NERC), "Reliability Assessment 1999-2003," planned additions by utility companies to generation in the Eastern and Western Interconnects is inadequate to meet forecasted loads. ^1/  Likewise, the transmission system is being subjected to flows in magnitudes and directions that make it problematic whether energy can be delivered to deficient areas. ^2/

The Clinton Administration will not acknowledge that there is a national energy crisis.  Instead it sweeps the problem aside and proclaims to the suffering electorate that energy shortages are temporary, regional, supply problems.   When pressured for a solution to these "regional" problems, the dunderheaded Richardson tries to con the public with the same piecemeal approach to problem solving as the Clinton Administration has so adroitly used elsewhere:  Carve a national crisis into local, bite-size portions, then propose a uniquely "pork" solution to ingratiate Clinton with the public. ^3/  Similarly, the wails of consumers have yet to stab the consciences of the presidential candidates.  Both George W. Bush and Al Gore have learned well from the Clinton Administration’s standardized approach:  Say as little as possible.

The reason Clinton, Gore, and Bush stand so stalwartly mute: the energy lobby.   Likewise, Congress’ watchdog agency, the Federal Energy Regulatory Commission (FERC), has been abysmal in its role as guardian of the nation’s electric service.   As is the case with other "alphabet soup" federal agencies, FERC is stirred to action by the groans of the power companies it regulates.  Again, consumers lose to the energy lobby. ^4/

What is missing in this year of energy pain, is a national call for conservation.   Localized energy shortages can be tempered by regional energy conservation.   For example, California competes with Arizona and Nevada for power.  For every watt of power saved in Arizona and Nevada, there is one more watt in the power pool to restrain the upward pressure on wholesale electric prices and the concomitant pass-through to consumers.

After another Arab oil embargo had paralyzed the United Sates, Jimmy Carter declared in April 1977, the "moral equivalent of war" to end profligate energy use.  He went so far as to dim the lights at the White House and turn-off outside lighting on the District of Columbia monuments.  Republican nay-sayers raucously criticized Carter for his vulgar expression of defeatism. ^5/  While they laughed at his attempt to address the complex subject of energy usage, they squandered the time needed to bring the U.S. electrical system into the 21^st century.   Regretfully, Clinton has done no better than his republican predecessors. ^6/

The failure of the Federal government to acknowledge a crisis and initiate an immediate conservation campaign is a travesty.  It would be a simple matter to enlist the aid of radio and TV broadcasters through the Advertising Council to air public services messages to conserve electricity.  However, as usual, we are faced with a government that cannot do its job.  Our patriotic responsibility requires us to shoulder the burden for our mistakes.  Turn off a light.

Footnotes

1/  NERC report at page 6, "Near tern reliability is dependent on merchant (non-utility) capacity additions.  Reported summer capacity margins for 1999 through 2003 are… dangerously low…."

2/  NERC report at page 6 "…If there is insufficient transfer capability between the Interconnections and the Regions to move the available capacity where and when needed, some areas of the Interconnection could experience capacity shortfalls.  These supply and demand conditions logically could also result in price spikes for the available wholesale power."

3/  This is precisely what Clinton did in his March 18 radio address in which he requested that Congress create an emergency 2 million barrel heating oil reserve for Northeast states.

4/  In response to requests from five utilities, the Federal Energy Regulatory Commission (FERC) announced in mid-July that it would investigate the extreme jumps in the wholesale price of electricity that occurred in the Midwest during June.

5/  Carter’s program worked. Consumption of foreign oil dropped from 48 percent to 40 percent during his term of office.  Through the first half of 2000, U.S. reliance on foreign oil amounted to 56 percent of domestic needs, just off the peak of 57 percent set in 1998.

6/  In a June 27 statement, the American Petroleum Institute claimed that "It has been two decades since we had a national discussion of energy strategies…"

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