Electric Reliability: The August 2020 Rotating Outages, California’s Publicly Owned Electric Utilities, and the Value of Local Control

January 2021

California experienced an extreme heat wave in August 2020 that caused the California Independent System Operator (CAISO) to direct electric utilities in its balancing authority to shed load, or in more common terms, to initiate rolling blackouts. Ultimately, 492,000 customers lost power on August 14 for between 15 and 150 minutes, and 321,000 customers lost power on August 15 for between 8 and 90 minutes.

Maintaining electric reliability — keeping the lights on 24/7 — is a complex task, involving intensive engineering and planning, and adherence to state and federal standards. California’s publicly owned electric utilities (POUs) take seriously the obligation to provide reliable electricity, and during the August 2020 heat wave POUs took both supply- and demand-side actions to address power supply shortages in the CAISO balancing authority area. POU balancing authorities did not implement rolling blackouts during the August heat wave.

Electric Reliability, Overseen by Balancing Authorities, Is Paramount

All POUs are required by state law to prudently plan for and procure adequate resources to meet peak demands and operating reserves. This legal construct is known as resource adequacy. Its implementation is based on whether a POU provides electric service in the CAISO balancing authority area as outlined below.
Every POU — and every electric utility in the country — is part of a balancing authority. These critically important organizations manage the electric system in real time, determine the generation needed to meet demand, and manage power flows across systems to meet customer demand in every hour of every day.

There are 38 balancing authorities in the western half of the United States, eight of which are in, or partially in, California. Balancing authorities are regulated by the federal government and must adhere to strict federal reliability standards enforced by the North America Electric Reliability Corporation (NERC), which is overseen by the Federal Energy Regulatory Commission (FERC). There are significant penalties if reliability performance standards are not met.

The biggest balancing authority in California is CAISO, which covers 80 percent of the state’s electric system, including almost half of the state’s POUs. Collectively, POUs serve about 9 percent of the electric load in the CAISO system. The CAISO is a not-for profit public benefit corporation created by state law in 1996.

Over half of the state’s POUs provide electric service in four separate community-owned balancing authorities that closely monitor their electric system and make operational decisions to ensure they have adequate power to meet demand in their service territories. These are the Balancing Authority of Northern California (BANC), which covers SMUD, Roseville, Redding, Shasta Lake, Trinity PUD and Modesto Irrigation District; the LADWP balancing authority area; the Turlock Irrigation District (TID) balancing authority area; and the Imperial Irrigation District (IID) balancing authority area.

POUs in the CAISO Balancing Authority Area Encouraged Conservation and Ramped Up Power Output during the August 2020 Heat Wave

The rolling outages in August 2020 occurred within the footprint of the CAISO. Twenty POUs serve electric load in the CAISO balancing authority area. Some POUs in the CAISO footprint were called on to initiate rolling blackouts on August 14. This is how the CAISO grid is designed: regardless of a particular utility’s ownership of generation or resource procurement, all utilities in the CAISO share in the collective effort to maintain supply and demand for the 80 percent of California in the CAISO footprint.

During the heat wave, POUs serving load in the CAISO encouraged customers to conserve energy by setting their air conditioner thermostats at a higher temperature, closing window blinds, and shifting major appliance use to before or after peak hours. As local electric providers, POUs also have close relationships with their customers and were able to conduct direct outreach to larger customers to encourage demand reductions. For example, Silicon Valley Power — a POU serving load in CAISO — was able to work with its large customers to reduce grid demand by 85 megawatts, a substantial amount.

In addition, POUs within the CAISO footprint ramped up their power output as much as possible. For example, using their own generating units, Pasadena Water and Power provided 150 megawatts of electricity, using their own generating units, for the CAISO grid during peak periods.

POUs in Community-Owned Balancing Authority Areas Did Not Cut Power and Assisted the CAISO Grid

POUs in these balancing authorities did experience heat-related equipment outages (hot temperatures can put stress and transformers and other critical electric equipment), but they did not cut power during the August events. Like POUs in the CAISO balancing authority, they too encouraged their customers to conserve power. They also were able to help supply power to the CAISO balancing authority that helped avoid more widespread outages. For example, LADWP and SMUD, while closely monitoring their own supply and demand trends, were able to provide a significant amount of power to the CAISO grid when it was needed most, helping to stave off more severe rolling blackouts.

Overall, supply conditions were tight and affected everyone. POU balancing authorities continue to have a strong incentive to avoid reliability violations and penalties because they are accountable to their customer-owners who demand reliable electric service.

Moving Forward: Constantly Improving to Enhance Electric Reliability while Maintaining Affordability and Achieving the State’s Climate Goals

In a preliminary root-cause analysis released in October 2020, CAISO and the state’s energy regulatory agencies blamed the August 2020 outage on three primary causes: 1) the need to better incorporate extreme West-wide heat events in the current resource planning process; 2) failure to plan to meet demand in early evening hours when solar production is ramping down, during the transition to a less-carbon intensive grid; and 3) issues in the CAISO energy trading market. The preliminary assessment offered numerous recommendations to resolve the issues.

As not-for-profit agencies governed by local elected officials, POUs have taken careful steps to invest in diverse and balanced energy resource portfolios to meet the demand of their customers. POUs are focused on reliability, affordability, and partnering with the state to meet climate goals.

Affordability is very important. While POU electric rates are on average 15% lower than the electric rates of private utilities, California overall has some of the highest energy costs in the nation. Based on an analysis of data from the U.S. Department of Energy, between 2008 and 2018 monthly residential electricity costs rose in California by an average of about $30, while the national average increased only about $10. Electric utilities and their customers face significant cost pressures, including wildfire mitigation and the procurement of additional renewable energy. Reliability solutions should therefore be carefully aligned with identified problems to ensure customers only pay for targeted solutions that resolve the issues.

POUs are proud of their record, but they also recognize that they can always do better and are constantly striving to improve reliability for their customer-owners at the local level. And at the state level, they know the issues are complex, and the solutions — such as those suggested in the preliminary root-cause assessment — will be equally complex. There is no silver bullet solution. We must work together on necessary actions to ensure reliability in a way that preserves the ability of POUs to respond to their communities’ needs, while also protecting against unnecessary rate increases for customers, many of whom are already struggling to pay their bills.