California is enduring its fourth year of a drought and in January, Gov. Brown declared a drought State of Emergency. Water shortages and dead lawns aside, Californians should know that their energy bills will also feel the effects. On average, 10-15% of California’s electricity is generated through hydroelectricity from stores of snowpack in California mountains. As the snow melts, the runoff is directed through generators to make electricity. While the concerning lack of snow and hydroelectricity should not cause power outages, it will have to be replaced by power purchases from other sources like natural gas fired electricity, renewables (wind and solar) and imported electricity from the Pacific Northwest, and that will come at an increased cost. Utility rate effects won’t be known immediately as rates are generally made on forecasts and then adjusted later to reflect reality. If you are eligible to buy your own power, Burton Energy Group can help plan for and mitigate price risk.
Fortunately, the significant progress made in bringing renewable power sources on-line has reduced the State’s dependence on hydroelectricity. The State’s utilities and power generators have also been storing natural gas knowing that it would have to replace hydro-power with gas-fired power.
This is Part 1 of our new mini-series discussing Supply and Risk Management! Stay tuned more posts this summer!