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Gas-Fired Generation Drives Electric Changes

Gas-Fired Generation Drives Electric Changes

Technological changes and the natural gas industry probably will do more to push electric industry restructuring than Congress or federal regulators ever do, according to Washington, DC-based representatives for a national group for large energy consumers and the electric utility industry's trade association, speaking at the GasMart/Power 2000 meeting in Denver earlier this month.

Between combined-cycle natural gas merchant power generating plants and the development of distributed generation, gas-related technological advances will help unleash more competition and corresponding lower energy prices, officials from the Electric Consumers Resource Council (ELCON) and Edison Electric Institute (EEI) told participants at a forum on "The Importance-or not-of Electric Restructuring Legislation."

From the large energy customers' perspective, the natural gas suppliers are now providing more than just a commodity, and it is incumbent on electric suppliers to do the same, said John Anderson, executive director of the consumers council.

"It is a remarkable difference in tone with the way the customer is actually approached now by gas suppliers," Anderson said. "It can happen in the electric industry. The technologies are there. They have been invented; they just haven't been implemented. The question is will it happen? Existing but unimplemented products aren't any good."

The seeds for today's electric restructuring through the development of gas-fired merchant power plants were sown back in the 1960s with the massive jet turbine research and development for the airline industry, said Charles Linderman, EEI's director of a newly formed alliance between merchant and utility generators.

"The one challenge the gas industry does face with technology comes from the environmental emphasis put on electric catalytic reduction systems. This has potential to limit locations of power plants."

Linderman noted that the push to cutback on hydro-electric dams in the Pacific Northwest particularly could result in even more natural gas-fired generation being developed in California. For him, it is another example of environmental concerns driving energy developments.

"Watch the environmental issues," he told the GasMart attendees. "Some in Washington would like to put an environmental emphasis on electric industry restructuring bills. I frankly believe that technology is producing changes faster than legislation can interpret them. In many ways, all of this type of technological change does not wait upon the legislative process."

However, ELCON's Anderson expressed skepticism about the regulated utilities' ability and willingness to implement the technologic advances to benefit large power consumers. He said one of his largest members, Intel Corp., the computer chip manufacturer, operates its own power quality programs in its plants because local utilities can't provide comparable services.

"We have to protect captive customers from the monopolies exploiting their market power. Regulatory action must assure fair and nondiscriminatory access," Anderson said.

"Electrons flow according to the laws of physics, not in response to state boundaries. States should not inhibit the flow of power. Electricity flows in interstate competition more than any other commodity in this country."

Anderson said the large industrials' council sees what he calls "real competition" bringing lower prices, but as an economist by training he sees a "dichotomy between the technologically advanced telecommunications, entertainment and financial industries and the technologically challenged electric industry." He doesn't think this dichotomy can last much longer.

Anderson criticized utilities, regulators and attempts by Congress to pass electric restructuring legislation. He said that "confusion reigns" in most states in terms of energy restructuring, and he cited New York as an example where he said the policymakers are going in "six or eight different directions." Ultimately, Anderson predicted some sort of national legislation would be necessary, although he cautioned that it needed to be free of dominance from the regulated utility sector, which he characterized as wanting a "one-size-fits-all solution that ends up fitting nobody."

EEI's Linderman warned his industry audience to watch environmental developments because he thinks that electricity reforms now are being driven by an environmental agenda, and that is not necessarily positive for electricity suppliers or customers. Ultimately, he sees the natural gas and electric generators working closely in the formulation of future policies.

"Despite all the talk about electricity restructuring legislation, it may not be the key to the electric and gas industry futures," Linderman said. "Environmental legislation and the ongoing EPA war on coal are more likely to drive gas demand for power generation than is restructuring."

Richard Nemec, Denver

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