Generators Go Another Round on Mountainview at FERC

Stubborn generators have not given up their fight over Southern California Edison?s Mountainview project approved in February by the Federal Energy Regulatory Commission. The Independent Energy Producers (IEP), Calpine, and other suppliers this week urged FERC to review its ruling, which allows Edison to run the 1,054 MW plant as an affiliate under a 30-year power-purchase agreement. FERC has ?dealt a serious blow to development of competitive wholesale markets,? said IEP in its rehearing filing. Suppliers are concerned that Edison will squeeze independents out of the market if Edison demands below-market prices from them while reaping higher prices from its affiliate. According to IEP, Mountainview will increase Edison?s generation capacity by 20 percent, from 5,000 MW to 6,100 MW, increasing its share of the market in its service territory to more than 40 percent, based on average demand. During deregulation, state regulators asked utilities to divest their own generation assets to make room for competition. That left Edison with pared-down ?native? generation, including the San Onofre Nuclear Generating Station and a few hydro facilities. Mountainview would increase native generation, although Edison would own it only through an arm?s-length agreement with a subsidiary for 30 years. Thus, market generators see it as moving to dominate territory in which Edison owns most of the supply, drying up market liquidity and competition. Along with power costs, plant cost overruns will be borne by ratepayers, said Calpine. According to public records detailing construction cost overruns of the most recent and rather infamous utility-built plants in California?Diablo Canyon, Helms Pumped Storage, and San Onofre units 2 and 3?costs surpassed initial estimates by 1,670 percent, 360 percent, and 930 percent, respectively, according to Calpine. The Mountainview plant?s price was $50 million in 2002, when Intergen purchased it from AES as little more than a site and a California Energy Commission approval, to an expected $703 million in 2006, when Mountainview is set to be up and running (see Circuit , March 5, 2004). A competitive bidding process, which was absent during the review of Mountainview by the California Public Utilities Commission, would reap lower power costs for ratepayers and attract needed capital, generators argued in their attempt to get the deal re-reviewed by federal regulators.

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Generators Go Another Round on Mountainview at FERC

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