While California regulators continue to emphasize efficiency, conservation and renewable energy, long-term power plans could include substantial supplies from billions of dollars of traditional natural gas-fired generation.

Including provisions that allow for future utility development of new electric generation, the California Public Utilities Commission (CPUC) Thursday unanimously approved private-sector utilities' long-term power-buying plans, covering the 10-year period of 2007-2016. Collectively, the plans could result in an additional 3,400 MW of new generation.

Understanding that natural gas-fired generation is still king, the CPUC action authorized Pacific Gas and Electric Co. to pursue up to 1,200 MW of traditionally produced power; Southern California Edison Co. up to 1,700 MW, and another 530 MW for Sempra Energy's San Diego Gas and Electric Co. The regulators added the caveat that these projects should only be pursued after "the higher order of preferred resources are exhausted."

CPUC President Michael Peevey said the regulators' primary objective in reviewing the long-term plans was "to determine whether the utilities are procuring preferred resources as set forth in the Energy Action Plan." Peevey cautioned that Thursday's decision was not a "blank check" to line up fossil fuel generation indiscriminately. "The needs of our utilities can be met in a multitude of ways," he said.

Peevey also addressed the issue of utility-owned and developed new generation, which has been a sore point with independent power producers who fear over time they will be eased out of the business. He called the issue "quite possibly the most contentious issue in the proceeding" at the CPUC.

"This decision does not prohibit utilities from owning generation; however, it implements many safeguards designed to allay the concerns of merchant developers that utilities would use rate-based investment to undermine competitive [generation] markets in California," Peevey said.

A use of independent evaluators for proposed projects, procurement review groups and a new "code-of-conduct" for utility employees will help preserve California's hybrid market system, he said.

In making its decision, the CPUC said it considered all of the electric resource procurement policies and programs in play in the state, including implementation of the preferred ways to meet energy demand as outlined in the latest version of the Energy Action Plan -- energy efficiency, demand response, renewables, distributed generation and then "clean and efficient fossil fuel-fired generation."

©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.