California's Energy Crisis

Letter by Al Bartlett, January 4, 2001

Hon. Bill Owens, Governor of Colorado
Hon. Terry Phillips, Colorado Senate
Hon. Ron Tupa, Colorado Senate
Hon. Todd Saliman, Colorado House of Representatives
Hon. Tom Plant, Colorado House of Representatives
Hon. Alice Madden, Colorado House of Representatives

Dear Friends,

It is simply outrageous to read how the U.S. Secretary of Energy came to Colorado to ask western states to sell electric energy to California to help bail out Californians from a big utility problem that Californians have created for themselves.

The unfortunate thing is that we in Colorado may be well on our way to repeating the California electrical disaster.

WHAT HAPPENED IN CALIFORNIA?

Here is what seems to have happened in California:

1. The population of California has been growing rapidly for decades.
   
2. Population growth causes growth in the demand for electricity.
   
3. It is apparent from California's shortages of electrical energy, that the utility companies in California have not constructed new electrical generating capacity sufficient to keep up with the growth of demand for electricity in California.
   
4. If these statements are correct, then it can't come as a surprise to learn that there is an electrical energy crisis in California.
   
5. The surprise is that Californians are surprised by the shortage of electricity.

Now we must ask why California's electrical utilities apparently have not been constructing generating capacity to keep up with growth of demand for electrical energy in California. Certainly, the high cost of purchasing new electric generators is a factor. So, let's look at some ballpark cost figures for building new electric generators.

THE COST OF NEW ELECTRIC GENERATORS

The purchase price of electric generators is something like $1 a watt. Coal plants may cost more, nuclear plants cost much more, while natural gas turbines cost perhaps half of this. Let's use $1 a watt as the basis for some very simple calculations. As a rule of thumb, the utilities report that they need about 1000 watts of generating capacity for one new person. This means that for every person that moves into the service area of an electric utility, the utility must spend about $1000 in capital costs for the purchase of new electric generators. (This is not for fuel and other operating costs, nor does it include the costs of expanding the electrical distribution system that conveys electricity to the consumers. This is just to purchase and install the generator.)

Add a million people to a population, and the utility must find $1 billion to spend purchasing a billion watts (One gigawatt) of new electric generators. The only place this $1 billion can come from is the customers of the utility.

By way of reference, I believe the largest single generating plant in Colorado is the plant SE of Pueblo that has a capacity of a little under one gigawatt.

COSTS OF ELECTRIC GENERATORS vs. POPULATION GROWTH RATES

Expressed in terms of growth rates, one can say that if the population of the service area of an electric utility grows by one percent in a period of time then, in that period of time, every person in the service area must pay 1% of $1000 as that person's share of the cost of the electrical generating equipment needed to accommodate the population growth that took place in that period of time. That's $10 for every man, woman, and child in the utility's service area! If the population of California is growing 2% per year, then every man, woman, and child in California has to pay something like $20 a year to fund the purchase of the needed new electric generating plants! (Note; financing costs are not included in this estimate. If bonds are issued to pay for a new generating plant, the total costs, including interest on the bonds, may double the total cost cited above.)

These numbers suggest one reason why, over recent decades, the electric utilities in California appear to have been reluctant to invest in the purchase of new electrical generating capacity. The utilities did not want to sock their customers with these high costs, or perhaps they were not allowed to charge these costs to the customers.

There are certainly other reasons for this reluctance that have to do with regulation, pollution, etc.

CONSERVATIVE MANAGEMENT

A few decades ago, I believe that the conservative management of electric utilities called for a utility to have about 20% more generating capacity than is required to service the peak expected load. This conservative management practice would allow a utility to have one of its generators out of service because of accident, or for maintenance, without there being any loss of service to the customers of the utility.

For whatever reason, it appears that the electric utilities in California have abandoned this conservative management criterion, and have let demand grow until the margin between maximum supply and peak demand is razor thin. The utilities have counted on being able to purchase needed peak power from neighboring utilities whenever they wished. Now it turns out that with de-regulation, purchasing outside power costs an arm and a leg, if outside power is available.

A QUESTION

Question: What has the California Public Utilities Commission been doing all these years when the California electric utilities have allowed their spare electric generating capacity (the excess of maximum supply over peak demand) to decline to close to zero?

WHAT DO WE EXPECT OF A PUC?

I know nothing of the laws governing the Public Utilities Commissions (PUC), but it would seem logical to expect that one of the responsibilities of a PUC would be to monitor and report on this aspect of the performance (the available capacity cushion) of the utilities for which the PUC is responsible. It would further be expected that if a PUC learned that one of its utilities was not keeping supply comfortably ahead of demand, and was not planning to keep the projected supply ahead of projected demand for the future, then that PUC should have the responsibility for reporting the facts to the state Executive and Legislative branches and to the public. If the reported situation continued to deteriorate, it would be expected that there would be strong executive and legislative remedies.

Without knowing events in detail, one is led to conclude that, quite possibly, the California PUC has been derelict in meeting its responsibilities.

In the present crisis, it is reasonable for other states to be asked to help California, but only if the Executive and Legislative branches in California have taken strong steps to correct the situation that the California officials have allowed to happen.

WHERE WAS THE U.S. DEPARTMENT OF ENERGY?

In any reasonable world the U.S. Department of Energy (DOE) would be monitoring the developments in the areas of energy supply and demand throughout the country and would be in the forefront of calling for corrective actions any time that projections showed that demand was growing faster than supplies. As far as one can tell, the California crisis seems to have caught the DOE by surprise.

OUTLOOK FOR BRINGING SUPPLY UP TO MEETING DEMAND

The California shortage of electrical energy will not be "solved" until there is, within California, or within the control of the California PUC, electric generating capacity of about 20% greater than the expected peak demand in California. This will undoubtedly require the construction of several gigawatts of electric generating capacity at a cost of several billion dollars. (A gigawatt of electric generating capacity will cost about a billion dollars and will serve about a million people)

With zero population growth, the planning, financing, and construction of the needed electrical generating capacity could easily take five to ten years. If California's population growth continues, this will significantly increase the time needed to relieve the problem.

So once you get into the California-style electrical energy shortage, there is no quick fix.

THE EFFECT OF A PROLONGED SHORTAGE OF ELECTRICITY

The high-tech world and the world of high-tech industries are totally dependent on a reliable uninterrupted supply of electrical energy. The present unreliability of the California electrical energy supply, and the long time it will take to remedy the shortages, could have profound effects on California's high-tech industry.

One expected effect will be the migration of some of that high-tech industry to parts of the country with reliable electric power.

SUMMARY

Put in its simplest terms, population growth in California is probably the principal factor in the genesis of the present electrical crisis in California.

THE PROBLEM IN COLORADO

The U.S. Census reports released last week show that Colorado's population grew from 3,294,394 in 1990 to 4,311,882 in 2000. This is an increase of 1,017,394 people in a decade, and this corresponds to an average rate of about 2.69% per year. In this decade, we should have constructed about one gigawatt of new electric capacity, which would cost the ratepayers of Colorado about $1 billion. If we say the average population in Colorado in the decade was 3.8 million, then the cost of this needed construction of electric generating capacity would be $260, or $26 per year for every man, woman, and child in Colorado. I don't know how much new capacity was constructed in Colorado in the decade just past, but I would be surprised if one gigawatt of new capacity had been added to the electric generating capacity of the State.

There have already been reports that Colorado's population growth has caused a growth in demand for electricity that may soon exceed the available supply. Colorado could be one of the next states to experience a serious electrical energy crisis. It is therefore prudent to ask:

1. Do the Colorado electric utilities currently have a conservative margin of generating capacity of around 20% in excess of peak demands, so that one of the Colorado electric generating plants could be taken down for maintenance without disrupting Colorado's economy?
   
2. If the Colorado electric utilities don't have this needed margin, has the Colorado PUC been alerting the Governor and the Legislature of the impending excess of demand over supply, so that these bodies can take the necessary executive and legislative remedies to head off a crisis?
   
3. If the Colorado PUC has not been reporting this problem, who has the oversight responsibility for the Colorado PUC?

In spite of these problems which are caused by population growth, there are groups in Colorado, both governmental and private, that spend enormous sums of money each year in advertising, seeking to get more people and more companies to move to Colorado. We can predict with reasonable accuracy the increase in electric generating capacity that is required to meet the needs of any proposed increment of increased population, so we know exactly where we are headed.

Unless strong corrective actions are taken now, a California-style electricity shortage can be expected to cripple the economy of Colorado.

THE DOUBLE WHAMMY!

But there is a double whammy. The escalation of electrical demand is the major factor in the recent astronomical increases in the price of natural gas in Colorado.

Some new electrical generating plants are being built in Colorado, but most, if not all, are gas turbine plants that burn natural gas. The enormous gas consumption of these plants is certainly a major factor in creating the shortages of natural gas that are responsible for the recent large increase in the cost of natural gas to heat our homes and buildings. As this is written, the news tells of a third large increase in natural gas rates that is being submitted to the Colorado PUC. The TV news has featured Colorado families that are very hard hit by these increases in the natural gas rates. So many more such news stories can be expected.

The population growth in Colorado is increasing our natural gas rates, and this can be expected shortly also to increase our electricity rates.

The benefits of population growth accrue to a few, but the costs have to be borne by everyone.

RECOMMENDATIONS

The electric utilities in Colorado should be required to keep, in Colorado, at all times, a conservative margin of generating capacity that exceeds peak expected demand by about 20%.

The utilities should be required to build coal-fired electric generating plants so that the remaining supplies of natural gas can be saved to heat homes and buildings in Colorado. The Wyoming coal fields are nearby and the Wyoming coal reserves are large. The coal-fired electric plants should have all the most up-to-date technologies for pollution control.

A good case can be made for calling for a moratorium on population growth in Colorado until the present residents of Colorado can be assured that electricity and natural gas supplies are adequate to supply the people of Colorado for at least a decade without further large increases in electricity and gas rates, and independent of events in other parts of the country.

POPULATION GROWTH IN THE UNITED STATES

The recently released U.S. Census figures show that the following population growth rates for Colorado and for the U.S. The world growth rate is estimated to be about 1.3% per year.

The United States sends foreign aid in the form of family planning assistance to countries that have smaller population growth rates than Colorado has!

The last U.S. President who was concerned about population growth in the U.S. was Richard Nixon, whose Rockefeller Commission Report concluded that they could find no benefit to the U.S. from any further U.S. population growth.

In spite of this warning, the population growth rate of the U.S. is approximately 1.24% per year. If Colorado's population growth exceeds 1.24% per year, then we are being asked to accept more than our share of the burden. Electrical shortages are a part of that burden.

CONCLUSION

It seems most urgent that the Governor and the Legislature address these electric generating capacity situations in the coming session. By being honest in assessing the problem, we may be able to find solutions that avoid the crisis that the governmental agencies of California have allowed to happen to the people of California.

With best wishes for the holidays, I am,

Respectfully yours,

Albert A. Bartlett

P.S. By way of background, I have a Ph.D. in Nuclear Physics (Harvard 1951) and I have lectured from coast to coast on "Arithmetic, Population, and Energy" for over 31 years.