Reliant Offers to Cut Emergency Spot Power Prices to CA

California state and local officials Thursday reviewed a new proposal from Houston-based Reliant Energy offering lower emergency spot market power prices in exchange for letting up on air emission restrictions that limit the hours of operation annually to some of Reliant's power plants along the coast in Ventura and Santa Barbara counties.

After receiving a letter making the offer Wednesday from Reliant's John Stout, vice president for asset commercialization, Gov. Gray Davis' spokesperson said the governor intends to carefully review the proposal. However, some local air quality regulators indicated they already had offered to increase the hours of operation for Reliant's plants facing restrictions.

However, the merchant power plant generator is asking for all of its hours of operation during state-called power alerts to be allowed and not counted against the air emission annual operating hour restrictions.

Reliant proposed to drop emergency spot prices from the plants in question to the $150-$250/MWh range (from the $1,500-$1,900/MWh) in return for unlimited hours during state-declared power alerts.

"We would agree to price the power produced by these units at a cost-based price determined in a manner consistent with the methodology established by the Federal Energy Regulatory Commission for calculating proxy market clearing prices," Stout wrote in his letter, noting the FERC methodology would be applied without taking into account potential replacement power costs.

Stout asked for expedited treatment on the idea, recognizing that the availability of Reliant's generation units should not be inhibited during the upcoming summer peak-demand times. He called the situation facing California this summer "challenging," and asked for the Davis Administration's support in facilitating the proposal.

In pushing the proposal as a means of assuring more power available this summer at more reasonable prices, Reliant is looking to be able to use the previously restricted plants more for backing up its other generation units and it would intend to have part of its agreed-to emergency power prices go to a fund for offsetting emissions reductions, so that any added air pollution created by the plants during state-called power alerts can be mitigated.

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