Fears of System Vulnerability Increasing

Dec. 13, 2001
Bottom Line Energy Issues - December 2001- Part 4 of 4

Although national guard troops are patrolling nuclear power plants in Florida, proponents of alternative energy point out that radioactive spent fuel rods stored at the 103 nuclear plants around the country and the thousands of miles of unguarded transmission lines pose tempting targets for terrorist groups. Rep. Edward Markey (D-MA) warned Nuclear Regulatory Commissioner Richard Meserve that one spent fuel facility in Skull, Utah contains about 40,000 metric tons of nuclear waste that "will be easily visible from the air and from a nearby road, and so could be vulnerable to attack."

With little debate and by voice vote, Congress passed H.R. 2983, the Price-Anderson Reauthorization Act of 2001. Christopher Sherry, research director for the Safe Energy Communications Council noted, "...this vote rubber-stamped industry plans to build more nuclear plants...taxpayers should not bear any potential liability in the newly deregulated marketplace for the industry's profit-based construction decisions." The Price-Anderson Act limits the liability of nuclear power plants in case of an accident to pennies on the dollar, something environmentalists oppose.

A U.S.-Canadian group called the Pacific NorthWest Economic Region called a meeting on Nov. 30 in Spokane to talk about system security measures. Washington state rep. Jeff Morris noted that the region is terribly interdependent, but that vulnerabilities that interdependence creates have never been analyzed from a security perspective. He observed that the system was designed for efficiency. "It's not built for redundancy." At the national level, Energy Secretary Spencer Abraham said his staff is working on emergency planning with privately owned energy facilities. Key to gaining cooperation among competing firms is their willingness to disclose proprietary information that could harm their market share or even violate some antitrust restraints. Except for nuclear safety, Abraham noted that "the control and responsibilities are exclusively in the private sector."

Golden Gate Fog Hides Troubled Waters in California
San Francisco voters narrowly rejected Measure F, by 533 votes out of 130,000 ballots cast, a referendum calling for formation of a municipal water and power company that would take over operations of the bankrupt Pacific Gas and Electric Company. Supporters laid the defeat to millions spent by PG&E to sway public opinion and vowed they would be back again with a better voter campaign next time. Privately owned utilities fear a loss in the Golden Gate would open gates to other CA communities and help expand pressure for more public power companies throughout the state.

In Sacramento, the newly formed California Power and Conservation Financing Authority was getting settled in new offices, hiring staff, and laying out its long range goals. Led by S. David Freeman, ex-manager of the LA Dept. of Water and Power, the agency's first and primary task is tackling the enormous debt piled up by Gov. Davis when he negotiated 54 or more long term contracts at average prices of $75/Mwh for electric power to help mitigate the temporary exorbitant price spikes. Recall they were imposed on the three investor-owned utilities, threatening his administration last spring and forcing PG&E into bankruptcy. With the cost of those contracts estimated at $43 billion and the state facing power surpluses due to conservation and accelerated plantconstruction, CA tax payers are facing untold deficits if the excess power must be sold at a loss on deflated markets at $16/MWh.

Freeman thinks it is time to begin renegotiating those contracts down to more reasonable market-based prices.As an incentive to negotiate, CA could offer suppliers financing help with building more generators within the state. Unfortunately, some of the suppliers do not need any more plants in CA and the pending glut of capacity diminishes the state's bargaining power. Another issue facing Freeman and his staff is how much power capacity to hold under state control to mitigate any future price spikes if demand outruns supply. One solution he proposes is for the state to buy the hydroelectric plants from PG&E. This move would help the utility out of bankruptcy, but standing in the way is opposition from state regulators who don't want the company to split off its hydro-generating assets into an unregulated business they cannot control. All these issues might have been avoided if the original CA plan for deregulation had not forced the incumbent utilities to sell their generation plants and then buy high on the spot market and sell at losses under price caps at retail.

States to Watch
If you own and operate buildings, deregulation activities in several states will bear watching closely in the new year. We will be reporting on developments that might impact your bottom line as these events occur. For now, here is a list of the states we will track and report on for you beginning in January: Indiana, Virginia, Texas, Florida, Oklahoma, Louisiana, and Arizona to mention a few. In addition we will be discussing trends in distributed generation that could put a power plant in each of your buildings sooner that you might expect.

That's the bottom line for this year.

Happy Holidays and Best Wishes for the New Year.

By Lewis Tagliaferre

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