'Hydro-fuels-', Maintenance-, and Pricing Risk Management -Changing Times in Snow Zone Water Management

In August 1996, the California Legislature passed legislation (AB 1890) that established new policies and restructured California's electric Industry. The Bill established an Independent System Operator (ISO), a Power Exchange (PX), a rate-reduction financing program, a public benefits program, and called for increased system reliability. With the deregulation of California's electric utility industry taking place, the water management team at Pacific Gas and Electric Company (PG&E), an investor owned utility, is facing a new challenge. Future pricing uncertainty will likely become as important to snow zone reservoir management as seasonal remaining weather uncertainty has traditionally been for forecasting snowmelt runoff and maximizing hydro generation in the past. While PG&E has been utilizing probabilistic extended streamflow predictions for some time in making hydroelectric scheduling decisions, it has only recently begun to look at how weather uncertainty will be handled by energy traders that are selling electricity into the California Power Exchange and eventually into a futures market. Electricity futures market pricing (one to three months ahead) is beginning to have a significant effect on how much risk an operator may be willing to take with regard to storing water in anticipation of a better price at some future date. In a sense, water is perishable with regard to use for hydro generation. If stored, there is risk that the weather could turn wet and that water may be spilled past fully loaded powerhouses