Analysis: Path 15 An Energy Breakthrough?
Los Angeles (UPI) Dec 14, 2004
Gov. Arnold Schwarzenegger and a top official of the Bush administration flipped the switch Tuesday on a new power transmission line in central California that has been touted as a model for future grid expansions nationwide.
The expansion of Path 15, a north-south line that became infamous as a congested transmission bottleneck during the California power crisis of 2000 and 2001, was accomplished with self-serving but nonetheless beneficial assistance of private-sector financing of the type that is likely to become the best, if not the only, means of paying for such projects in the immediate future.
With California's Path 15 public-private partnership, we have created a national model for developing new transmission infrastructure, Robert Mitchell, president of Trans-Elect Inc.'s New Transmission Development Co., said with pride as Schwarzenegger and Deputy Energy Secretary Kyle McSlarrow presided over the brief dedication ceremony.
The ceremony took place in the spacious grid control room in Folsom, just outside of Sacramento, a key battleground area just a few years ago when California frantically wrestled with soaring power prices and tight supplies. The energy shortage repeatedly forced the need for rolling blackouts that left thousands of people without lights, air conditioning, elevators, cash registers and countless other modern conveniences.
The blackouts also sparked a gubernatorial recall campaign that ushered the political but popular rookie movie star Schwarzenegger into office and made energy policy a leading priority of President Bush when he took office in January 2001.
McSlarrow told the small crowd in Folsom that fixing California's electricity problem was a topic of discussion at the White House while the Bush team was still unpacking, and that Path 15 was considered a major element in the crisis. McSlarrow remembered, One thing that kept coming up as we talked to the governor (Democrat Gray Davis), his staff, the utilities and the other stakeholders was this thing called Path 15.
Path 15 is the name given to a pair of transmission lines running some 83 miles between substations in Fresno and Merced Counties. While most of California's major transmission segments consist of three 500-kilovolt lines, Path 15 previously only had two. Discussions about adding a third line in the 1980s unceremoniously fizzled, leaving a nagging bottleneck in the system that was being used increasingly to run power between the growing urban areas in the northern and southern halves of the state. Problems pockmarked the system for years, though.
Over the years, it wasn't getting fixed, McSlarrow said.
Meanwhile, the idea of expanding commerce in electricity so that power produced in one state could be sold into another state with the presumably lower-priced electrons being shipped to the customer over an increasingly interconnected grid was growing in popularity.
New transmission lines enable available power to be moved around California, Mitchell explained. These lines also supplant the need to build new power plants and reduce the impact of pollution.
Grid expansion can be a tricky question in many states where governments have little extra money or political capital to pay for multi-million dollar projects, particularly when the beneficiaries are likely to be merchant power producers and traders located in other states whose primary goal is to sell power at whatever price the market bears.
The National Council on Electricity Policy said in a September report that energy deregulation has not in fact been the proverbial golden goose, as evidenced by the collapse of the once-monolithic Enron, and venture capitalists are not eagerly lining up to finance transmission lines, which means utility companies can no longer be counted on to foot the bill for grid improvements.
Those who make the significant financial investments required to build new transmission lines must justify their investment to bankers or to capital markets, the report said. Particularly in recent years, due to the major changes to electric power markets and new financial uncertainties in those markets, it has become difficult to raise capital to make any large investment, including investments in transmission.
Eliminating bottlenecks - such as Path 15 - is also seen as critical to allowing a deregulated electricity market to function and get the dream of a robust merchant energy industry back on track after being derailed by the California energy crisis and subsequent pratfall of Enron, the one-time poster child for deregulation.
The answer, according to the administration as well as industry and energy analysts, could be found in bringing private enterprise into the mix so that venture capital could be tapped to pay for the pricey projects.
Participants in the Path 15 project Tuesday said its success was the result of an unprecedented team of stakeholders in which the Department of Energy's Western Area Power Administration would build and operate the line; Pacific Gas & Electric Co., would expand the substations in Merced and Fresno Counties, and Trans-Elect would assemble the required financing.
In return for its considerable investment, Trans-Elect was granted long-term transmission rights that will give them a cut of tolls paid by traders moving power across the lines, a portion of which will be used to pay off the banks and other investors that chipped in with the equity funding.
At the same time, state and federal agencies expedited the permitting process, particularly the environmental reviews that a number of critics contend have hampered needed investments in the U.S. grid as well as pipelines and other energy infrastructure.
The result, Trans-Elect said, was that the Path 15 project came in under budget at $250 million and opened a door to freer movement of power up and down California, a development that Schwarzenegger said Tuesday would save Californians as much as $300 million annually on their collective electric bills. The additional line will carry enough power to supply 1.5 million homes.
Expanding Path 15 was a major component of our energy plan, Schwarzenegger crowed as the first volts began sizzling across the newly built power line after his muscled arms threw the symbolic switch.
With better transmission, more generation, a commitment to energy efficiency and conservation, we will accomplish the common sense goals of my energy plan - more power at lower prices, he continued.
If the Path 15 expansion delivers on its sweeping promise, it could indeed become the launching point for the type of expansion of the nation's power grid that the Bush administration and the energy industry hope to see nationwide.
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