Independents Say They Can Hold Their Own In Market Shakeup

By Published On: October 24, 2008

In an October 22 letter to the California Public Utilities Commission, Pacific Gas & Electric’s contention that the financial crisis undermines independent power projects was refuted. “The independent energy industry has been and will be in for the long haul in building new generation,” wrote Jan Smutny-Jones, head of the Independent Energy Producers. “To quote Mark Twain, ‘The reports of my death are greatly exaggerated.’” Smutny-Jones took issue this week with PG&E chair Peter Darbee’s claim that the volatile market would undermine non-utility power projects. In a letter mid-October, Darbee urged the commission to have a backup plan if independent power developments fall by the wayside because of financing challenges (Circuit, Oct. 17, 2008). Earlier this week, the utility criticized the proposed CPUC decision that would prevent it from building the 560 MW Tesla power plant, which it admitted it had dropped. The utility told the commission that the proposed ruling prevents “a viable, environmentally-beneficial, cost-effective new generation resource that could have replaced a number of failed or at-risk projects.” PG&E asserted that it is likely to “drop below the minimum 15 percent planning reserve margin” creating the risk that its system could suffer service reliability problems by 2012. That risk, it claims, is due not only to the cancellation of the Eastshore and Bullard projects and delay of the Russell project, but also because of the prospect of unexpectedly higher peak loads, possible limits on once-through cooled power plant operations, and “risks” of additional project cancellations. “In our view, the financial crisis highlights the need to shift financial risks of new generation from ratepayers while stimulating competition among independent energy producers, resulting in a clean, reliable and efficient power portfolio for California,” countered Smutny-Jones. The utility versus independently-owned generation debate came to a head when PG&E proposed building and owning the Tesla project. IEP urged state regulators last August to investigate whether PG&E’s and the other two private utilities’ power buying practices violated the hybrid market endorsed by CPUC (Circuit, Aug. 22, 2008).

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