During Rolling Blackouts Last Summer, California Kept Exporting Power Out of State. There's Still No Permanent Fix

When hundreds of thousands of Californians lost power during a heat wave over two evenings last August, California was also — unbeknownst to most ratepayers — exporting thousands of megawatts of power to neighboring states.

Those rolling blackouts, the first in two decades, have been largely blamed on factors like climate change-induced heat waves and the state's large-scale transition to renewable energy generation. And while the California Independent System Operator — which manages 80% of the state’s grid — has acknowledged it also allowed power exports at the time, the state has yet to come up with a permanent fix to the problem.

The rotating outages didn’t last long, cutting the lights for only a small fraction of the state’s 40 million residents. Just under half a million homes and businesses went dark for as long as 2½ hours on Aug. 14, with another 321,000 utility customers losing power for up to 90 minutes the following evening. While relatively minor compared to last year's massive electricity shutoffs aimed at preventing power lines from sparking wildfires, the mishap exposed a host of statewide grid issues and poor planning, a cautionary tale as California heads into what promises to be another hot, dry summer.

California's first readiness test has already come this week, with a major heat wave that continues to hit much of the state. Those conditions have prompted California ISO to issue its first Flex Alert of the year — urging people to conserve energy between 5 p.m. and 10 p.m. on Thursday to prevent a repeat of the 2020 blackouts.

Earlier this year, the California Public Utilities Commission directed the state’s utility companies to line up more power supplies, including from natural gas plants. Energy storage and conservation efforts have also gotten a boost.

These efforts came after California ISO, the CPUC and the California Energy Commission also laid partial blame for last summer’s blackouts on scheduling coordinators — the liaisons between power plants and California ISO — whom they said failed to secure enough power resources ahead of what ended up being two of the hottest days of the year, according to a “root-cause analysis” demanded last year by Gov. Gavin Newsom.

At the same time, a software problem signaled that California had excess power that it could comfortably export to other states. As it turned out, though, power demand in California exceeded what was actually available. The report cited “convergence bidding,” a financial tool that energy traders use to bet on what the state’s power needs will be for the following day. Although intended to help keep electricity prices stable, the mechanism instead “masked tight supply conditions” during the August heat wave, the analysis concluded. California ISO later said it had fixed the software flaw.

Western states routinely exchange power. To keep up with its massive energy needs in real time, California imports more power from its neighbors — mainly Nevada and Arizona — than any other state. It also returns the favor, exporting excess power when neighbors need it.

But last summer’s rolling blackouts accelerated debate over California's role in moving power across state lines when demand spikes.

“The fact that they prioritized exports at the expense of [California’s] load is mind-boggling,” said Rick Humphreys, a retired engineer and power reliability expert. “Where's the dividing line between being nice to your neighbors and being overly nice to your neighbors at the expense of California customers?”

Even after months of meetings, stakeholder calls and workshops aimed at ensuring the state’s grid operators and regulators are prepared for this summer, the debate is expected to continue well into next year. For now, California ISO has proposed temporary changes to market rules that aim to prioritize California’s needs, including some restrictions on trades that use California's grid as a pathway to transport power from one state to another — known as “wheel-through transactions.”

"It is critical the CAISO have reasonable measures in place to address this situation more effectively," the grid operator wrote in a proposal it has asked the Federal Energy Regulatory Commission to approve by the end of this month.

Going into this summer, California ISO and the CPUC’s Energy Division have at times clashed over the specifics of the updated rules. While the CPUC has been generally supportive of the proposed changes, it has also questioned whether they go far enough, specifically raising concerns that they will still prioritize wheel-through transactions over the state’s needs.

“If allowed to continue, [this] will seriously jeopardize reliability in the state and undermine the resource adequacy and transmission planning processes,” CPUC regulatory analyst Michele Kito wrote in recent comments on California ISO’s market reform proposal.

Conditions in the run-up to last summer’s rolling blackouts — when California ISO allowed exports of more than 4,000 megawatts of electricity (enough to power approximately 3 million homes) — serve as an example of what happens when exports and wheel-through trades are given priority during tight conditions, Kito wrote. “A durable solution will need to be developed.”

California ISO has expressed confidence that its changes will help California through this summer, despite reduced hydropower capacity due to drought conditions.

“We are members of a vastly interwoven western electricity market, both importing and exporting energy. Our transmission system is built to accomplish that,” California ISO President and CEO Elliot Mainzer said on a media call Wednesday afternoon. But he also signaled that the status quo may be changing. “We are really moving into a mode where what we used to consider one-in-30-year events are becoming truly a new normal, which will force some level of rethinking of what that dependency could look like.”

More adjustments are on the horizon, according to Ben Hobbs, chair of California ISO’s Market Surveillance Committee.

“We've never been as clear as we should have been about who has rights to use California's grid,” Hobbs said, adding that California’s dependence on imports means it must play nice with other states. “If we just said to Arizona that they can't use our grid for wheel-through power anymore, that would really upset how things have gone for decades. You can bet Arizona is going to be really ticked off.”

Hobbs said California consumers must be willing to pay higher prices to secure power when competition with other states tightens during a crunch. He likens the state-to-state competition for energy to a game of musical chairs.

“If prices here are $100 or $150 [per megawatt-hour], whereas Arizona is willing to pay $2,000 at a time that we're curtailing load, we're not going to get our fanny in the chair when the music stops. That's a particular thing that needs to be fixed,” Hobbs said.

Others have blasted the idea of allowing higher prices, especially with so many lingering questions about last year’s rolling blackouts, including what they ultimately cost ratepayers — a price tag that California ISO says it has no plans to tally.

“Why would California want to expose itself to a game of musical chairs when it comes to safety and our economy?” said Loretta Lynch, who was president of the CPUC during California’s 2000-2001 energy crisis. “We should require the CPUC and California ISO to use their regulatory and enforcement authority to lock in clean electricity at reasonable prices.”

Lynch has called on California’s attorney general to investigate California ISO’s role in last year’s rolling blackouts.

“My biggest concern here is if California doesn't get this right, not only does this cost us money, it hurts real people,” Lynch said.

Joanna Gardias and Dominic Moscatello are UC Berkeley undergraduate students. They contributed to this story after completing a course on energy regulation at the Goldman School of Public Policy taught by Steve Weissman.