Term Paper on "Energy Conservation Plan"

Term Paper 6 pages (1750 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Energy Conservation Plan

Energy conservation has become a matter of extreme interest at global level, but at individual level as well, given the fact that energy consumption has its repercussions on all of us. The effects that energy consumption has on the environment have determined world's nations to take measures that focus on energy conservation. The process of energy conservation does not address governments and state's institutions only, but individuals as well. Without individual support, these policies cannot attain their objectives. The following pages will focus on discussing the energy crisis that took place in California, beginning in the year 2000. The problem's causes will be discussed, followed by its consequences, and measures that were taken or that were supposed to be taken.

Over the past 30 years California has been established as a model in the energy conservation matter, a model that should be followed by other states as well. Even more, since 1974, California has managed to maintain energy consumption per individual at a constant level, unlike other regions in the United States (Mufson, 2007). These positive results were achieved through a combination of measures, including mandates, regulations, and high prices. California's state institutions have also managed to reduce greenhouse-gas emissions, to maintain satisfying conditions for utility companies, and to encourage economic growth.

However, starting with the summer of 2000, California had to deal with an energy crisis. The crisis was divided into three directions in order to be better analyzed and dealt with. The three directions are: high wholesale electricity prices, intermittent power shortages, and three investor-owned utilities were facing severe financial problems (DOE, 2005).

Wholesale electricity prices have started to increase in California starting with June 2000. The average increase was of 270%, determining a price of $376.99 per MWh in December 2000. This situation led to increased retail electricity prices and the retail price freeze was eliminated. In order to put an end to this situation, California's Legislature established a ceiling of 6.5 cents per kwh.

Regarding intermittent power shortages, their number has significantly increased between 1999 and 2001. The number of situations where rotating blackouts were required has increased as well. In certain situations, voluntary curtailment of power usage was necessary.

The three utility companies that were affected by this situation were: PG&E, SCE, and SDG&E. PG&E was more than affected by the situation, since it went bankrupt in 2001. For SCE the estimated losses reached the value of $2.6 billion. As SDG&E is concerned, the company's situation was a little milder, since the losses reached only $447 million.

Specialists in the energetic field have not quite agreed on a set of specific factors that have influenced this problem. Industry leaders however, have their ideas about what the main contributing factors to this situation are. For example, one of the responsible factors is considered to be the investment in new power capacity, investment that was unable to keep up with the continuously increasing demand for electricity. This situation determined the generation capability to decrease. As a consequence, the State of California was forced to acquire out-of-state energy.

Also, during the year 2000, part of California's generation capability was not able to be put in use, which caused severe power shortages, in conditions of high demand. The uncertainty situation on the market determined the suppliers of PG&E and SCE to stop or to diminish the amount of energy supplied to these companies. The increase in wholesale electricity prices were determined by an increase in natural gas prices, on the one hand, and by the high cost of building the new power plant due to emissions requirements, on the other hand.

California's governor and the state's Legislature took a series of measures that were meant to diminish the impact of the crisis and to prevent further situations of this kind. After the Legislature's debates, two bills were passed in order to increase energy conservation and to speed up the construction of new plants. The conservation process was expected to have a 40% rate increase, and was supposed to bring its contribution to maintaining prices under control. The after-crisis recovery process took a longer time than expected because of opinion differences between California's governor and the state's Legislature.

However, the energy crisis has had it share of positive effects as well. This situation helped California's lawmakers to make a series of positive changes in the crisis management process, like: using separate committees that are supposed to manage the immediate crisis, using informal working groups in order to supplement the committee process, full appreciation of crisis consequences before taking any actions (Weintraub, 2002).

The general mitigation plan that was designed to increase energy conservation in the state included: supplementing low-income energy assistance programs - $120 million; supporting renewable energy and distributed power generation - $95 million; reducing energy consumption in agriculture - $70 million; giving incentives for efficient commercial lighting - $60 million; granting rebates for purchasing efficient air conditioning and appliances - $50 million; installing sophisticated meters to measure electricity consumption - $35 million; creating more efficient oil and gas pumping projects - $12 million; educating the public - $10 million; teaching school children about energy efficiency - $7 million.

More specifically, the measures implemented by the state's institutions were:

California's Public Utility Commission diminished its buy-side price cap to $500 per megawatt on June 28, 2000. On August 1, 2000 the price was reduced to $250 per megawatt. On August 3, 2000 the CPUC established a rate stabilization plan for SDG&E in order to reduce prices for some of the company's residential and commercial customers. On August 30, 2000 the state's legislature established new rate caps of 6.5 cents per kwh.

On December 14, 2000 an order was issued which demanded that certain generators and power marketers to provide electricity to California's power system operator so that the number of power shortages to be diminished. Afterwards, the Federal Energy Regulatory Commission issued an order as well that demanded remedies for wholesale power markets. In January, a 90 days temporary surcharge was implemented in order to raise rates. On February 2001 the state's governor authorized a power purchase under long-term contracts for sale to PG&E and SCE.

In March 2001 the 3 cents per kwh average rate increase was approved. The month that followed, California's governor came up with a plan that was designed to increase power supply, to increase energy conservation, and to stabilize the state electricity sector. This plan was followed by another, which belonged to the Federal Energy Regulatory Commission, and that was designed in order to supplement stability, control, and price relief efforts. These plans were followed by a series of emergency bills.

The summer of 2001 brought an extended price mitigation and market monitoring plan from the Federal Energy Regulatory Commission. In September 2001 the retail choice in California was suspended (DOE, 2005).

Some specialists in the field do not agree that the energy crisis in California was determined by an increased power demand. In a fact sheet issued by the U.S. House of Representatives' Committee on Government Reform, it is stated that "energy supply within California kept pace with demand. The total amount of electrical energy generated in California increased over 36% from 1991 to 2000. The increase in generation has far exceeded the state's 13% population increase and 19% consumption increase over the same period. However, due to drought and other factors, the availability of out-of-state energy supplies in 2000 was reduced" (Committee on Government Reform, 2002). Another fact that experts cannot agree on is related to the Clean Air Act, which some consider not to have interfered with California's electricity production, as clean air regulations allowed for power plants to function properly. The report also states that the real cause for this energy crisis is market manipulation combined with a flawed deregulatory scheme. Other specialists in the field consider that the measures taken by the state's governor and Legislature were taken too late.

However, any mitigation plan regarding energy conservation must be based on the state's institutions' planning, but it should also be supported at individual level as well. In other words, each individual should bring its contribution to reducing energy consumption. Therefore, after California's energy crisis, the energy conservation campaign that followed benefited from a lot of support from the state's citizens that understood the dimension of the problem and its consequences. Some considered this campaign to be the most successful in the state's history. California's Energy Commission made certain recommendation to homeowners that were meant to help reduce energy waste. These recommendations included: turning thermostat on heater to 68 degrees or bellow, closing heater vents in rooms not in use, closing shades and blinds in order to reduce heat loss, turning off nonessential electric lights, avoiding running large appliances, and others (Public Management Magazine, 2001).

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