California Still Golden to Independent Generators

By Published On: September 8, 2006

Despite their complaints about doing business in the state, several energy company chief executive officers told financial analysts they would like to profit from California’s tight electricity supplies. In comments to the investment community September 6, NRG Energy and Mirant executives embraced potential expansion in the state. Meanwhile, Sempra chair and chief executive officer Don Felsinger said that San Diego Gas & Electric and SoCal Gas are investing billions in the state’s gas and electricity infrastructure. Pacific Gas & Electric is investing $280 million in its new corporate culture. “I prefer markets like California,” said NRG chief executive officer David Crane. “It is the right market to be in in terms of growth,” he added. NRG owns older power plants, primarily on the South Coast. Crane said the company responded to Southern California Edison’s request for proposals for new energy contracts. Mirant is working with PG&E to expand its Pittsburg power plant facility. However, chief executive officer Ed Muller reiterated that the talks with PG&E are still in the “early stages.” That was the same phrasing Muller used in early August to describe the progress of talks between the utility and the company (Circuit, Aug. 11, 2006). Muller said there is potential for both the Pittsburg and Contra Costa sites to be expanded because they have adequate land, existing infrastructure, and regulatory support. However, he added, “I don’t want to be Pollyannaish about how easy it is to build in California.” Both Sempra and PG&E emphasized to the financial community that they are investing in their own territories. Sempra utilities SDG&E and SoCal Gas are investing $6 billion in infrastructure for the next five years, which is about $700 million more per year than the companies have spent in the recent past, according to Felsinger. “The biggest challenge in California is to manage rates,” he said. The company’s long-term goal, he added, is to stabilize energy prices. PG&E chief financial officer Chris Johns played up the utility’s corporate culture “transformation” project – focusing on pleasing its customers and having a better relationship with regulators. Johns referred to it as a “virtuous circle” – that is, if customers are happy, then regulators are happy, and then shareholders are happy. “We need to earn their respect and delight [customers] every single day,” he said. The $280 million invested in the utility’s transformation project should generate $70 million in savings this year, according to Johns.

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