Electricity and Natural Gas Supply, Reserves, and Resource Adequacy

CMTA Energy Conference

Energy: Growing California’s Economy

William J. KeeseCalifornia Energy CommissionJuly 29, 2004

2

An Opening Thought…

• Promote energy efficiency

• Diversify portfolio with renewable energy

• Offer consumers energy choices

• Strengthen California’s energy infrastructure

Remember the Loading Order

3

Helping the California Economy:An Energy Report Card (Post Crisis)

• Energy Efficiency– 5000 MW during crisis– About one-third permanent savings– Demand Response programs being developed

• Renewable Energy– Lots of PV– RPS– WREGIS

• Consumer choice– No direct access and some exit fees– Core/noncore structure being addressed

• California’s Energy Infrastructure– New generation and natural gas infrastructure added.– LNG on the horizon?

4

California Electricity Outlook:Summer 2004

Interruptibles

Spot Market Imports

High Probability Additions- Only

Net Firm Imports

adjustments for retiring units and

1-in-10 Summer Temperature

Demand (Normal)

counts plants deemed 75% orbetter chance of being built.

Emergency Response Programs/

Existing Generation (reflects

Demand (Hot)

1-in-2 Summer Temperature

both forced & planned outages)

4

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Jun Jul Aug Sept Oct

Meg

aWat

ts

4

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Jun Jul Aug Sept Oct

Meg

aWat

ts

5

California Electricity Outlook:2004 - 2010

Emergency Response Programs/Interruptibles

Spot Market Imports

High Probability Additions- Onlycounts plants deemed 75% orbetter chance of being built.

Net Firm Imports

Existing Generation (reflectsadjustments for retiring units andboth forced & planned outages)

1-in-10 Summer TemperatureDemand (Hot)

1-in-2 Summer TemperatureDemand (Normal)

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

2004 2005 2006 2007 2008 2009 2010

Meg

aWat

ts

6

California’s Electricity Outlook: Projected Operating Reserves

0%

2%

4%

6%

8%

10%

12%

14%

16%

2004 2005 2006 2007 2008 2009 2010

Year

Op

erat

ing

Res

erve

Projected Operating Reserve (1-in-2)

Projected Operating Reserve (1-in-10)

7 % Target Operating Reserve

Stage 2 Emergency - When Reserves dropbelow 5.0%

Stage 3 Emergency - When Reserves dropbelow 1.5%

7

1,415

2,172

3,199

0

2,518 2,386

185

730

6,158

2,891

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2001 2002 2003 2004 2005 2006 2007 2008

Me

ga

wa

tts

Power Plant Status Report Over 20,000 MW approved, but many projects not moving forward…

Approved butNo Construction

UnderReview

Approved &Operating

Approved & UnderConstruction

8

Resource Adequacy

Definition: “A condition in which sufficient generation and transmission resources exist to cover

load and satisfy reserve requirements”

Outstanding issues:– Tradeable capacity credits– ISO dispatch control over nominated resources

9

California’s Electricity Future…

10

Natural Gas Price Situation (Dollars per MMBtu)

• High natural gas prices continue to be a national problem.

• California natural gas prices have exceeded $5.00 per MMBtu for most of this year.

• California is actually doing better than the rest of the nation. – Main reason: Infrastructure

enhancements and efficient use of storage.

4.00

4.50

5.00

5.50

6.00

6.50

7.00

05/0

3/04

05/0

6/04

05/1

1/04

05/1

4/04

05/1

9/04

05/2

4/04

05/2

7/04

06/0

2/04

06/0

7/04

06/1

0/04

06/1

6/04

06/2

1/04

06/2

4/04

06/2

9/04

07/0

2/04

07/0

8/04

07/1

3/04

07/1

6/04

$/M

MB

tu

PG&E-Malin

PG&E-Topock

SoCalGas Border Average

Henry Hub

11

Natural Gas Storage Capacity and Inventories(Billion Cubic Feet)

Beginning of the month levels, unless otherwise indicatedCalifornia Energy Commission estimate

-

25

50

75

100

125

150

175

200

225

250A

ug-2

001

Oct

-200

1

Dec

-200

1

Feb

-200

2

Apr

-200

2

Jun-

2002

Aug

-200

2

Oct

-200

2

Dec

-200

2

Feb

-200

3

Apr

-200

3

Jun-

2003

Aug

-200

3

Oct

-200

3

Dec

-200

3

Feb

-200

4

Apr

-200

4

Jun-

2004

July

15,

200

4

Bil

lio

n C

ub

ic F

eet

Capacity

Inventories

Average inventories over the previous 5 years

12

California’s Natural Gas OutlookGeneral Observations

• Current supply/infrastructure is adequate…FOR NOW.

• Prices are higher than desired, but we are positioned to do better than the rest of the nation.

• Demand for natural gas is growing in California despite aggressive energy efficiency programs.

• Additional import capacity is needed to meet future demand.

13

California’s Natural Gas Future…

14

So Is State Policy Moving in the Right Direction???

Core/Noncore

Market Redesign

AB 2006

Tradeable Capacity Market

Procurement

15

Closing Thought: It All Depends on Your Perspective