CAISO demand reduction

---------------------- Forwarded by Phillip K Allen/HOU/ECT on 04/10/2001

05:50 PM ---------------------------

  

        Enron North America Corp.

       

        From:  Stephen Swain                           04/10/2001 11:58 AM

       

To: Phillip K Allen/HOU/ECT@ECT

cc: Tim Heizenrader/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, Matt

Motley/PDX/ECT@ECT, Michael M Driscoll/PDX/ECT@ECT, Chris

Mallory/PDX/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT,

Sean Crandall/PDX/ECT@ECT, Mark Fischer/PDX/ECT@ECT, Bill Williams

III/PDX/ECT@ECT, Diana Scholtes/HOU/ECT@ECT

Subject: CAISO demand reduction

Phillip et al.,

I have been digging into the answer to your question re: demand reduction in

the West.  Your intuition as to reductions seen so far (e.g., March 2001 vs.

March 2000) was absolutely correct.  At this point, it appears that demand

over the last 12 months in the CAISO control area, after adjusting for

temperature and time of use factors, has fallen by about 6%.  This translates

into a reduction of about 1,500-1,600 MWa for last month (March 2001) as

compared with the previous year.

Looking forward into the summer, I believe that we will see further voluntary

reductions (as opposed to "forced" reductions via rolling blackouts).  Other

forecasters (e.g., PIRA) are estimating that another 1,200-1,300 MWa (making

total year-on-year reduction = 2,700-2,800) will come off starting in June. 

This scenario is not difficult to imagine, as it would require only a couple

more percentage points reduction in overall peak demand.  Given that the 6%

decrease we have seen so far has come without any real price signals to the

retail market, and that rates are now scheduled to increase, I think that it

is possible we could see peak demand fall by as much as 10% relative to last

year.  This would mean peak demand reductions of approx 3,300-3,500 MWa in

Jun-Aug.  In addition, a number of efforts aimed specifically at conservation

are being promoted by the State, which can only increase the likelihood of

meeting, and perhaps exceeding, the 3,500 MWa figure.  Finally, the general

economic slowdown in Calif could also further depress demand, or at least

make the 3,500 MWa number that much more attainable.

Note that all the numbers I am reporting here are for the CAISO control area

only, which represents about 89% of total Calif load, or 36-37% of WSCC

(U.S.) summer load.  I think it is reasonable to assume that the non-ISO

portion of Calif (i.e., LADWP and IID) will see similar reductions in

demand.  As for the rest of the WSCC, that is a much more difficult call.  As

you are aware, the Pacific NW has already seen about 2,000 MWa of aluminum

smelter load come off since Dec, and this load is expected to stay off at

least through Sep, and possibly for the next couple of years (if BPA gets its

wish).  This figure represents approx 4% of the non-Calif WSCC.  Several

mining operations in the SW and Rockies have recently announced that they are

sharply curtailing production.  I have not yet been able to pin down exactly

how many MW this translates to, but I will continue to research the issue. 

Other large industrials may follow suit, and the ripple effects from Calif's

economic slowdown could be a factor throughout the West.  While the rest of

the WSCC may not see the 10%+ reductions that I am expecting in Calif, I

think we could easily expect an additional 2-3% (on top of the 4% already

realized), or approx 1,000-1,500 MWa, of further demand reduction in the

non-Calif WSCC for this summer.  This would bring the total reduction for the

WSCC, including the 2,000 MWa aluminum load we have already seen, to around

6,500-7,000 MWa when compared with last summer.

I am continuing to research and monitor the situation, and will provide you

with updates as new or better information becomes available.  Meantime, I

hope this helps.  Please feel free to call (503-464-8671) if you have any

questions or need any further information.