New Generation Starts Up in CA; Others Drop Out

Although California officials were gaining optimism from new electric generation plants finally coming on line last week and others expected to come on line in the next two weeks, there were signs that the electron rush of the past few years may peter out if the current uncertainties surrounding the state's electricity markets continue to fester.

The state's chief cheerleader for new supply, conservation and federally ordered suppliers refunds, Gov. Gray Davis took his pom-poms to the oil fields southwest of Bakersfield last week to flip the switch on a new 320-MW, simple-cycle cogeneration plant developed by Edison Mission Energy and Texaco Power and Gasification, whose supplies are totally dedicated to the state at about six cents/kwh, with a $4.40/MMBtu natural gas price over 10 years.

But current generators and other developers of new plants expressed caution toward continued unabated development of new plants, given pending state legislation that would impose windfall taxes and/or possible confiscation of private-sector generating plants, in addition to a law on the books that makes criminal acts of market manipulation by generators, if proven to be the case in court. (Most legislative proposals exempt new plants, however.)

Atlanta-based Mirant Corp. said last month that it is holding up its plans for new plants, even though it recently won state approval to build a new 530 MW plant in the East San Francisco Bay suburbs, and it has proposed building a new plant in electron-starved San Francisco. Mirant placed the plans on hold until it feels the state political and economic climate has stabilized.

And a Reliant Energy executive told stock market analysts last Tuesday he would not be surprised to see delays and even cancellations of power projects throughout the West because of uncertain prices and the strange political environment.

Another large generating company operating in California recently told NGI, any further projects it had been considering in California were "off the screen," and had been "pushed back to a study mode, at best." The generator, caught up in the current round of lawsuits, declined to be named.

Although he admits some generators "want to wait a little bit," Steve Larson, executive director of the California Energy Commission, which okays all major power plants, said, "generally speaking, the rush is still on. There are still people applying, so as far as we can tell. People are still coming to us with their energy projects and want them sited as quickly as possible." (About 7,800 MW are under construction, the energy commission said.)

"We don't have a shortage of people wanting to build plants here in the state," said one of Davis's spokespeople, Roger Salazar.

In the public sector, the nation's largest municipal utility, Los Angeles Department of Water and Power, has delayed plans on beginning construction of a 500 MW repowering project at an existing 325 MW power plant in the San Fernando Valley section of the city, because of problems with the local electrical workers' union that complained about the winning bidder being a nonunion contractor. LADWP said it could be delayed up to six months to allow the project to be re-bid.

In the meantime, although not necessarily counted in the governor's highly promoted new power plants, LADWP is moving ahead with five new 50 MW peaking plants at existing plant sites, as part of a $1.5 billion integrated resource plan for the next five years.

The governor stressed the accelerated time frame in which the Sunrise plant began construction on Dec. 7, 2000, making it operational in a record-setting 6.5 months. The construction force worked 18-hour days, six days a week, and the plant was brought on 32 days ahead of schedule. (Edison's MOU with the governor included financial incentives to get the plant on line early.)

That makes it eligible for more than $1 million in construction incentive payments under the Governor's Executive Order (D-32). By the summer of 2003, it will have an output of 585 MW. As a single-cycle plant, the authority to operate runs for only 18 months, or this and next year's summers. It will be expanded and brought on as a combined-cycle, cogeneration and baseload unit for a longer time period.

The plant is the first major one to start up since Davis took office. Two more are coming on line in the next two weeks. More than 4,000 MW of new power is expected to be online by the end of summer, in what the governor and his people are dubbing as "a California success story."

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