Reflecting the uncertainty of the regulatory process andextremely tight time frames, San Jose, CA-based Calpine Corp.Monday dropped plans for three of five temporary natural gas-firedpeaking power generation plants it had proposed as a stopgapmeasure to meet expected power shortages next summer.

The state energy commission that must okay all generating plantsof 50 MW or greater was surprised by the move, but a Calpinespokesperson said Tuesday that developing small, trailer- andskid-mounted generators on a short turnaround basis “is really notour business. We can’t be as competitive in these type projects aswe can on our larger, long-term ones, and these peaking projectsstill require relatively large capital investment.”

Reading between the lines of Calpine’s claim that the “businessdevelopment” aspects of the proposed plants in three San FranciscoBay Area locations — San Mateo, Newark and Brisbane — were thedeal-busters, it was clear that the company under-estimated theenvironmental and other regulatory hurdles, even using a newsix-month fast-track processing adopted under a new state law.

Calpine’s spokesperson said the company has no alternativeproposals, and it had felt “obligated” to attempt a response whenthe Cal-ISO, in September requested bidders to provide addedpeaking generation in time for next summer’s expected power crunch.Calpine’s familiarity with the state’s approval process for largebaseload power plants caused the company to think it could competein the peaking arena. But Calpine now has had second thoughts,according to a letter to the state energy commission from DouglasBuchanan, Calpine vice president for project development, deliveredlate Monday.

Both Calpine and the state energy officials reportedly have beendeluged by negative response from residents living near theproposed urban sites, citing concerns about air and noisepollution.

Cal-ISO is currently reviewing 42 peaking projects from 15bidders, totaling 1,865 MW as part of its efforts to ink contractsfor at least 2,000 extra MW of emergency peaking power capacity bynext summer. The terms of the deals for trailer- and skid-mountedturbines are not being disclosed at this point, but Cal-ISO islooking for three-year contracts that will carry them through thesummer of 2003.

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