California, With Mandated Capacity Purchases, Forced to Call for Conservation to Help Prevent Potential Blackouts

Despite the mandatory capacity obligations and purchases required of California load serving entities, including competitive retail electric suppliers, the California ISO has been forced to call a "Flex Alert" -- an early warning of potential emergency conditions -- twice over the past three business days.

According to the official Flex Alert website, "A Flex Alert is issued by the California Independent System Operator (ISO) who monitors and provides early warnings of possible electricity outages, allowing the public to better prepare for service interruptions and encourages energy conservation that may help prevent blackouts from occurring" [emphasis added].

In others words, strained California grid conditions have prompted alerts to the public to help prevent potential blackouts despite each California load serving entity subject to the PUC's resource adequacy authority being required to demonstrate procurement of sufficient capacity resources to cover 100 percent of the LSE's total forecast load plus a 15 percent reserve, for a total of 115 percent.

Meanwhile, in Texas (ERCOT specifically), where customers are not forced to pay generators in order to meet a capacity obligation, ERCOT has not called an Energy Emergency Alert this summer.

While we are not one to throw stones -- and recognize that ERCOT grid conditions could change quickly with weather -- California's current experience must be noted on two points.

First, California's current strain -- despite the capacity obligation placed on LSEs -- is a rebuke to what appeared to be an overly glib assessment by the Texas Tribune (which was also published in The New York Times), which reported that Texas was "dead last" in electric "reliability" (used to mean resource adequacy), and that, "That means that California — yes, California — is less likely to experience systemwide blackouts this summer than Texas. That even takes into account the problems at a major nuclear plant south of Los Angeles."

Although the Tribune article made no specific recommendations, the implication from the above quote is clear -- California's mandated capacity purchases give customers better reliability than ERCOT's energy-only market.

Second, and more substantively, California's current experience underscores the observation made by PUCT Commissioner Kenneth Anderson during the recent resource adequacy open meeting/workshop. As previously reported, Anderson noted that meeting target reserve margins does not necessarily assure resource adequacy, due to weather, demand, and other conditions, as Anderson observed, "We can get a 20% reserve margin, mandate it, pay for it, [and] it'd be billions and billions, and you still may not actually accomplish what you're trying to accomplish."

California customers, through their competitive electric service providers or investor-owned utilities, have certainly paid immensely to meet the capacity obligation imposed on their LSE, and their reward is to still be subject to razor-thin grid conditions, and the need for Flex Alerts.