YUBA CITY, Calif. -- The pastoral orchards of Sutter County north of Sacramento had never seen anything like it: a visiting governor and a media swarm -- all to christen the first major natural-gas power plant in California in more than a decade.
The Sutter Energy Center was hailed as the nation's cleanest power plant when it began operation in 2001. It generated electricity while using less water and natural gas than older designs.
A year ago, however, the $300 million plant closed indefinitely, just 15 years into an expected 30- to 40-year lifespan. The power it produces is no longer needed -- in large part because state regulators approved the construction of a plant just 40 miles away in Colusa that opened in 2010.
Two other large and efficient power plants in California also are facing closure decades ahead of schedule. Like Sutter, there is little need for their electricity.
California has a big -- and growing -- glut of power, an investigation by the Los Angeles Times has found. The state's power plants are on track to be able to produce at least 21 percent more electricity than it needs by 2020, based on official estimates. And that doesn't even count the soaring production of electricity by rooftop solar panels that has added to the surplus.
To cover the expense of new plants whose power isn't needed -- Colusa, for example, has operated far below capacity since opening -- Californians are paying a higher premium to switch on lights or turn on electric stoves. In recent years, the gap between what Californians pay versus the rest of the country has nearly doubled, to about 50 percent.
This translates into a staggering bill. Although California uses 2.6 percent less electricity annually from the power grid now than in 2008, residential and business customers together pay $6.8 billion more for power than they did then.
The added cost to customers will total many billions of dollars over the next two decades because regulators have approved higher rates for years to come so utilities can recoup the expense of building and maintaining the new plants, transmission lines and related equipment, even if their power isn't needed.
How this came about is a tale of what critics call misguided and inept decision-making by state utility regulators, who have ignored repeated warnings going back a decade about a looming power glut.
"In California, we're blinding ourselves to the facts," said Loretta Lynch, a former president of the California Public Utilities Commission, who along with consumer advocacy groups has fought to stop building plants. "We're awash in power at a premium price."
California regulators have for years allowed power companies to go on a building spree, vastly expanding the potential electricity supply in the state. Electricity demand has fallen since 2008, but California's new plants have boosted capacity enough to power all of the homes in a city the size of Los Angeles -- six times over. Additional plants approved by regulators will begin producing more electricity in the next few years.
The missteps of regulators have been compounded by the self-interest of California utilities, Lynch and other critics contend. Utilities are typically guaranteed a rate of return of about 10.5 percent for the cost of each new plant, regardless of need. This creates an incentive to keep construction going: Utilities can make more money building new plants than by buying and reselling readily available electricity from existing plants run by competitors.
Regulators acknowledge that the state has too much power but say they are being prudent. The investment, they maintain, is needed in case of an emergency -- like a power plant going down unexpectedly, a heat wave blanketing the region or a wildfire taking down part of the transmission network.
"We overbuilt the system because that was the way we provided that degree of reliability," explained Michael Picker, president of the California Public Utilities Commission. "Redundancy is important to reliability."
Some of the excess capacity, he noted, is in preparation for the retirement of older, inefficient power plants over the next several years. The state is building many new plants to try to meet California's environmental standards requiring 50 percent clean energy by 2030, he said.
In addition, he said, some municipalities -- such as the Los Angeles Department of Water and Power -- want to maintain their own separate systems, which leads to inefficiencies and redundancies. "These are all issues that people are willing to pay for," Picker said.
Critics agree that some excess capacity is needed. And, in fact, state regulations require a 15 percent cushion. California surpasses that mark and is on pace to exceed it by 6 percentage points in the next three years, according to the Western Electricity Coordinating Council, which tracks capacity and reliability. In the past, the group has estimated the surplus would be even higher.
Even the 15 percent goal is "pretty rich," said Robert McCullough of Oregon-based McCullough Research, who has studied California's excess electric capacity for utilities and regulators. "Traditionally, 10 percent is just fine. Below 7 percent is white knuckle. We are a long way from white-knuckle time" in California.
Business on 02/09/2017