President Bush released his new long-term energy plan Thursday, while many in California faced immediate energy rate hikes and the possibility of rolling blackouts again during the summer months.
Although Michigan is not facing the possibility of blackouts, many state policymakers have been monitoring California”s situation to work on a long-term solution to avoid the problem.
Bush”s energy plan, drafted by a task force chaired by Vice President Dick Cheney, outlines a long term solution to American energy problems without specifically addressing the current problem in California as well as rising gas prices around the nation.
In his speech in St. Paul, Minnesota, the president warned, “The future is achievable, if we make the right choices now. But if we fail to act, [we] could face a darker future, a future that is, unfortunately, being previewed in rising prices at the gas pump and rolling blackouts” in California.
Bush said his plan is an attempt to reduce American dependence on foreign by increasing coal-based electricity production and building more nuclear power plants.
Southern California Edison and Pacific Gas and Electric, California”s two major power companies, both won approval of the state Public Utilities Commission to increase rates to recoup money lost during the power crisis. The rate hike, approved last week, allows the utilities to increase the average California household”s rates by about $16 per month, according to S.C. Edison press releases.
To de-monopolize the industry, California”s 1996 deregulation plan forced utilities to sell off their non-nuclear power plants to other companies. This caused the utilities to repurchase power from the owners of their former power plants.
Everything was going okay until May of last year when the cost paid by the utilities per kilowatt-hour jumped from 11.5 cents to 34 cents, according to S. C. Edison. The plan also did not allow utilities to increase consumer rates to cover this increase.
On average, Californians will spend $1,028 yearly on household electricity, making California the sixth most costly state in which to buy electricity. Locally, Michiganders pay an average of $660 yearly for electricity, according to the Center for the Advancement of Energy Markets. Nationally, that figure makes Michigan the sixth lowest in yearly energy costs per household.
Jim Musial, director of regulatory compliance for Detroit Edison, indicated that Michigan will begin deregulation in 2001. Rates from May 2000 will be frozen through 2005. He said that if California had not suffered “bad luck” in terms of weather, their system, “might have served as a model for the national. And it would have been another state that discovered the flaws.”
Michigan has unique challenges since it encompasses two peninsulas, especially because it is much more difficult to bring power over water than land. Power for the Lower Peninsula comes from states south of Michigan.
Michigan policy makers have had a chance to evaluate the power situation in California before beginning deregulation. Musial said this allowed the state to, “see where problems occurred and how hard it is to fix them.” He feels the contingency plans the state has put in place will prevent similar problems.
Diane Brown, University spokeswoman for facilities and operations, said that if a situation similar to the one in California occurs in Michigan, the University would be in relatively good shape.
The University participates in a pilot program for deregulation called “Electric Choice.” Under the plan, the University switched from Detroit Edison to Engage Energy America just over a year ago. Brown estimates the University saves $1 million per year from this change.
Rising prices have caused the University to double its budget for natural gas from $15 million per year to $30 million. In January, when natural gas prices soared, the power plant switched some boilers to less expensive fuel oil to save money.
Electrical problems in Michigan would be unlikely to cause a problem for University power, Brown said, since Engage gets their power from a hub in Louisiana, where there are no problems forecasted.
Bush said of the plan, ” First, it reduces demand by promoting innovation and technology to make us the world leader in efficiency and conservation. Second, it expands and diversifies America”s supply of all sources of energy — oil and gas, clean coal, solar, wind, biomass, hydropower and other renewables, as well as safe and clean nuclear power. Third, and finally, the report outlines the ways to bring producers and consumers together, by modernizing the networks of pipes and wires that link the power plant to the outlet on the wall.