Talking Points - Maine vs. California Electric Restructuring

April 2001

Provided by the Maine Public Utilities Commission for the Utilities and Energy Committee

 

 

Comparing Electricity Grids: Background Info

 

·        California and New England.  The California grid is more the equivalent of the New England system than Maine standing alone.  The New England grid (of which most of Maine is a part) functions as one system, like California’s grid.  The New England grid has a single system operator, as does California’s grid.  The California system, however, carries twice the load of the New England system; peak summer demand on the California grid is projected at more than twice the 23,500 mW peak demand forecast for New England this summer.

 

·        Northern Maine.  The northern part of Maine is not directly connected to the New England electric grid, so is not considered part of the New England system.  While Northern Maine is connected to the New England grid through New Brunswick, its operations are overseen by a separate system administrator.  In this context, northern Maine includes the service territories of Maine Public Service, Eastern Maine Electric Cooperative, Van Buren Light and Power and Houlton Water Company.

 

Supply/Demand Balance

 

·        California: Demand outstrips supply.  Between 1996 and 1999, California’s peak load grew by ~ 5,500 MW, while it’s supply grew by ~700 MW, creating electricity shortages.  In fact, California has added almost no new generation for 10 years.  Taken together with the extended drought that has reduced hydro capacity, California’s generation situation has actually deteriorated in recent years.

 

·        New England: Demand meets supply.  New England generally has enough electricity to meet demand, and although its population growth is quite modest, New England is building more generation.  Maine itself is already producing twice its proportional share of the integrated New England demand, making it an electricity exporting state.

 

Regional Import Capacity

 

·        CA: Power importer / limited regional supplies.  While CA traditionally imported as much as 25% of its electricity from nearby states, it has recently been unable to get much power from neighboring states because electricity usage in those states has increased, and dry weather and fish-conservation measures have reduced hydropower available from those states.  The western states that ring CA have been the fastest growing states in the U. S. for the last 10 years (Nevada’s population, for example, grew 50%).  Their growth, together with California's, is creating unprecedented new demand for electricity.

 

·        ME: Power exporter / adequate regional supplies.  Maine typically produces twice its proportional share of New England demand.  It is a power exporter in a region that generally has adequate supplies.  The New England market has ties to major supplies in Canada, New York, and beyond.  These supplies are diverse and thus less likely to be disrupted.  Of New England’s neighbors, the Canadian Maritimes and Quebec have abundant supplies and are active sellers into the regional markets.  In any case, New England is far less dependent on imports than California.

 

Transmission Constraints

 

·        CA: Primarily affects imports.  The transmission system connecting CA to adjacent states (as well as its intrastate, north-south system) is inadequate and stressed, limiting CA’s ability to import power from other states or to move in-state supplies as needed.

 

·        ME: Primarily affects exports.  The transmission system connecting ME with the rest of New England is sometimes constrained, but when this happens, it primarily limits ME’s ability to export power, since we are a net exporting state.  It does not generally affect system reliability for ME.  The import capability into New England from other regions is also generally sufficient to meet current and expected needs.

 

Supply Contracting

 

·        CA: Prohibited long-term contracts.  CA had required, until recently, that electricity be bought on the day-ahead and spot markets, which typically are much more volatile.

 

 

Retail Price Cap and Price Deferrals

 

·        CA: Set price cap.  Retail price cap created mismatch between wholesale and retail prices.  Until recently when it raised some rates, CA had refused to increase retail rates.  More than $10 billion in costs have been deferred, leading CA utilities to the brink of bankruptcy with as-yet-unknown consequences for ratepayers.

 

·        ME: No price cap.  ME has no price cap, so has virtually no new price deferrals to recover.

 

Contributing Factors

 

·        CA: Sharp rise in demand for natural gas.  Oil and natural gas prices up.

 

·        ME: Rising worldwide oil and natural gas prices also are affecting electricity rates in Maine. Unlike California, however, Maine ratepayers should benefit quickly when prices for these commodities fall, because Maine is not locking into long-term deals when prices are high.