Calling it a “rebirth” for combined-cycle plants, Calpine Corp. CEO Jack Fusco said Wednesday that natural gas-fired capacity factors are rising in the electric generation sector, but power prices must also rise to encourage the building of more replacement capacity.

Fusco made those observations during a 4Q2012 and full year earnings conference call in which Calpine reported that both quarterly and full-year results last year were in the black, compared to the red ink it spilled in the same periods in 2011. Net income for 4Q2012 was $100 million (22 cents/diluted share) and for the full year 2012 was $199 million (42 cents).

With a heavily gas-fired power plant fleet, Fusco said there are several fundamental trends nationally that favor gas-fired generation. Those trends include the abundant supplies of gas domestically, stricter environmental regulations, aging uneconomic power generation infrastructure, and the increasing need for dispatchable power plants to successfully integrate intermittent renewable resources, he said.

Fusco said that Calpine is “double leveraged” for what he sees as the “combined-cycle recovery.” However, he sounded a warning that the company is going to have to be active on the regulatory front to “preserve the value of our assets.”

The threats he sees to his gas-fired fleet include the increased emphasis by regulators on demand response, uneconomic generation projects, and incorrect price signals in the power markets.

“Demand response raises concerns on many levels,” Fusco said. “From an environmental perspective, the fact that regulators consider an uncontrolled, inefficient generator set as an acceptable resource is inconsistent with the [Obama] administration’s goals of cleaner air.

He said that current federal regulations allow old, inefficient generation units to run more hours without emissions controls as demand response tools in direct conflict to efforts for cleaner air and a national climate change dialogue.

“Demand response is afforded more favorable conditions as a market participant than other forms of generation, and therefore the unlevel playing field is jeopardizing electric reliability,” Fusco said.

Calpine is also working to combat what Fusco called the “proliferation of noncompetitive generation.” He said elected officials and regulators are, “in effect, choosing winners and losers instead of allowing markets to work.” He listed a number of projects Calpine has labeled as uneconomic.

“These projects continue to move forward despite the fact that there are far more cost-effective and efficient alternatives available.”

In addition, the independent power plant operator is continuing to advocate for what Fusco called “fair, transparent and stable price signals” in California, Texas and the other markets around the nation where it operates.

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