Could Arizona face the woes
of Southern California?

The following is a summary of issues published in news articles about the recent power shortage in Southern California. This information shows what could happen in Arizona if we fail to plan for additional sources of power to meet population growth.

Power prices rise in California

• San Diego was hardest hit during the heat wave in summer 2001 due to wholesale market swings caused by a combination of deregulation of the electric industry and lack of power generation capacity.

• As a result, power prices in the San Diego area rose significantly this summer. San Diego Gas and Electric Co. reported that monthly electric bills nearly doubled from prices a year ago.

• A typical residential power bill increased to about $105 during the first week of August 2001 compared to $55 for the same electricity during the same period in 2000.

• Fixed-income customers and small businesses were hit the hardest.

• Many small businesses saw profits evaporate into monthly electric bills, reported The San Diego Union Tribune.

Growth fuels power demand

• In the 1990s, demand for power surged along with the California economy, according to The New York Times. But utilities, fearing they would be unable to recover their costs as the state moved away from regulations that guaranteed them profits, stopped building power plants, leaving the state's power supply simply no longer able to keep up with peak demand.

• California's economy surged from 1995-2000, a boom led by Internet and high technology companies, which are voracious power users.

• Growth is even more vigorous in the Pacific Northwest, Arizona and Nevada, making it harder for California to import the power on which it has relied.

The Wall Street Journal reported that California's crisis reflects several immense miscalculations:

• that California could indefinitely rely on surrounding states to meet its energy needs. In fact, neighboring states power demands have been growing so fast that they have less and less surplus power to sell to California.

• there was a dangerous assumption that demand would stay far beneath supply, so the state hasn't added significantly to its power plant capacity since the mid-1980s.

New power plants stalled

Power company officials have been critical about government reaction to this significant electricity supply shortage. The chairman of San Diego Gas and Electric Co. said the state has failed since it has done nothing to expedite construction of new power plants.

L.A. planned ahead

• One region of California has eluded the power shortage crisis: The city of Los Angeles has excess generation capacity and has been able to meet its demand needs as well as sell power to keep the California power grid stable.

• By investing in generation capacity in years past, Los Angeles has avoided the current crisis according to S. David Freeman, general manager of the Los Angeles Department of Water and Power.