Power Moves

When California’s power-producing industry ventured into the realm of deregulation as the first state to do so on in 1998, so did DWR.

Before deregulation, electrical utilities (DWR became a bulk power entity in 1983) traded, bought, and sold electricity among themselves. Power generated was transmitted though a grid of electrical lines built by different utilities to move energy to and from locations.

Previously, utilities such as Pacific Gas and Electric and Southern California Edison would enter into agreements to pay for a certain amount of power during a certain period of time. Smaller energy-producers had no access to the

California Aqueduct and power lines
transmission lines and were no match in the marketplace for the larger utilities. Price depended on time of day and availability.

During pre-deregulation times, prices were more predictable, except during shortages or emergencies. Utilities generally buy power in advance--from an hour to a day. So if DWR purchased 100 megawatts from PG&E for 6 p.m. that day, PG&E would produce power to meet all of its demands including the promised power to DWR and send it over their transmission lines to where it was needed. If they were not able to produce the amount needed to match demand with supply for that time period because one of their units shut down, the missing quantity would be supplied from the interconnected utilities and by PG&E at a later time.

With deregulation, new entities were created like the California Independent System Operator (now in control of utilities’ transmission lines) and the California Power Exchange(which acts as a commodities marketplace). Prices are now more volatile and penalties exist for those who don’t produce what they promised.

Because DWR is not under the jurisdiction of the Public Utilities Commission, it is not required to participate, but the Department wanted to be a starting player in deregulation. What this means to the Project is, based on the skill of its energy traders who are always in contact with the power market and other brokers, the Department can keep costs affordable for its contractors by selling power at top prices and buying it at bargain rates.