Enron Mail

From:energy@1stgmc.net
To:energygroup@buffalo.com
Subject:Utilities Biweekly Report
Cc:
Bcc:
Date:Tue, 20 Nov 2001 03:20:11 -0800 (PST)


=09 Utilities Biweekly Report =09
A news service for energy professionals =09 November 20, 2001 =09


To Remove, Substitute or Add an email address to our list, please send bri=
ef message to msid@ieee.org=20
=20
=20
Electricity Restructuring Gets Push From Republicans
Republican members of the Energy and Air Quality Subcommittee of the House=
Energy and Commerce Committee have agreed with Subcommittee Chairman Joe =
Barton, R-Texas, that restructuring legislation should move forward now th=
at Congress has a few more weeks in session. In an 8-2 vote last week, Rep=
ublican Committee members decided to continue drafting electricity restruc=
turing legislation. Electricity restructuring provisions were excluded fro=
m the energy bill approved by the House earlier this year. The issue was to=
be readdressed in the fall but was delayed due to the events on September=
11th. No action has been taken to date in the Senate.
Green Mountain Energy Expands Into Ohio's Restructured Market
Green Mountain Energy Company has entered into an agreement with the North=
east Ohio Public Energy Council (NOPEC) to service northeastern Ohio with =
solar and wind-generated electricity. NOPEC was formed last year under Ohi=
o's utility deregulation statute Senate Bill 3, which allows local governm=
ents to serve as aggregators for electricity customers. NOPEC consists of =
100 local communities with approximately 500,000 energy customers. Under t=
he agreement, Green Mountain Energy will construct a 25-kilowatt solar arr=
ay at Lake Farmpark in Kirtland, Ohio, and will conduct a study to determi=
ne the feasibility of siting a wind generating facility in Ohio. The Green=
Mountain Energy solar array will be the largest in the state and the firs=
t commercial solar array in Ohio built for the competitive market. The pro=
posed wind study will be the first commercial wind analysis executed solely=
for the competitive market.
Debate Over Deregulation Impacts in Oklahoma
Oak Ridge National Laboratory (ORNL) has reported, in a first-of-its kind =
study, that restructuring Oklahoma's electric industry can benefit consume=
rs, but problems and potential pitfalls do exist. The report has been met =
with some opposition however. Pete Churchwell, president of Oklahoma's sec=
ond largest electric utility AEP/PSO, stated on November 16th that he does =
not support the study's findings, one of which indicates that Oklahoma's e=
nergy costs could rise between 5 and 25 percent if the retail electricity =
market is opened to competition. The study results indicate that lower ele=
ctric prices may be available in the short term, but restructuring will ul=
timately bring higher prices. Under the state's restructuring plan, existi=
ng generating plants will have a competitive advantage over new plants. Th=
is advantage will result in higher prices in the long term because newer, =
higher-cost plants may be forced out of the marketplace. Churchwell contes=
ts that it is too early to know for certain how consumer rates will react =
in a deregulated market. While admitting that the nation's grid was not de=
signed for retail competition, Churchwell said that improvements in state =
transmission systems would allow a successful retail competitive market.
Utility still looks to be freed of generators
Clark Public Utilities has been trying in vain for two months to unload so=
me of the 50 portable generators that have become a multimillion-dollar wh=
ite elephant. The units, wired in rows near the River Road Generating Pla=
nt, were leased for a year for $19.5 million. The deal was signed with Gen=
eral Electric early this year, at a time when there were dire predictions =
about this summer's power supply. In addition to the equipment lease, the=
re is a $15 million natural gas contract to power the generators and a rou=
ghly $12 million expense to transport the gas. While Clark has been able to=
resell some of the gas at a loss, the transportation costs can't be reco=
uped. For weeks, electricity on the open market has been much cheaper tha=
n that produced by the generators. In place since July, the generators, e=
ach producing 1 megawatt of power, have run for just 39 days. Electricity =
prices have plunged, from a high of $325 per megawatt-hour this summer to =
less than $30 today. The price has to be about $95 to make operating the g=
enerators feasible. So utility officials have had no choice but to let the=
m sit idle. In September, the net expense for the generator farm gas, gen=
erator lease and so on was $3.5 million. For no electricity. Utility offi=
cials have tried to get GE to find customers for at least some of the gen=
erators. Tuesday morning, Andy Huck, Clark's operations director, said he=
had heard from GE about a "pretty serious inquiry" for two generators for =
two months. And that, he said, "is the best inquiry they've had so far." =
Now, utility officials are trying to decide whether to keep spending $62,0=
00 a month for three GE employees and other expenses associated with maint=
aining the generators. The theory is that the equipment should be tested,=
a few at a time, to ensure they will be ready if needed. "They told me t=
he generators need to be 'exercised,'" said Huck. "I told them they spent =
two months on a ship without being started." The units were built in Austr=
ia. GE, with a signed one-year lease in hand, has little incentive to fin=
d customers for the equipment, particularly when the company could presuma=
bly lease other generators from its inventory. "They say it's because we'=
re such good client" that an effort has been made to find other users for =
the generators, said Huck. Clark's $120 million River Road generating plan=
t features a giant GE turbine. Clark officials don't hold out much hope o=
f getting out from under the generator lease expense, which runs about $1.=
3 million per month. "Where would they go?" asked Jim Sanders, Clark's dir=
ector of energy resources. Meanwhile, the natural gas supply for the equi=
pment is being resold at about half what it cost the utility. Gas prices a=
lso have fallen since the supply deal was inked. At their regular Tuesday=
meeting, utility commissioners decided to proceed with a $100 million bon=
d sale that includes money to pay for the generator lease. In March, Rick=
Dyer, Clark's finance director, recommended that the utility cut a deal f=
or a one-year, $100 million "bond anticipation note." The arrangement was =
made on the assumption that interest rates would fall in a few months, whi=
ch they have to 1961 levels. The move Tuesday gave Dyer and utility Gener=
al Manager Wayne Nelson the OK to approve a bond sale of up to 15 years at=
6 percent interest although 5 percent or less is more likely, and the goa=
l is a 10-year term, officials said. The bond sale likely will occur in t=
he first week of December. The bulk of the $100 million borrowing is to cov=
er a $63 million power purchase from Kaiser Aluminum. The deal, like the g=
enerator lease, was for power to cover an August-September gap in Clark's =
power supply, before the start of a Bonneville Power Administration contra=
ct. That Kaiser purchase was at $325 a megawatt-hour. The utility lost a =
bid to have a federal judge declare the price exorbitant and order a parti=
al refund. =20
AEP, Reliant Named as Last Resort Providers in Texas
The Texas Public Utility Commission (PUC) has named American Electric Powe=
r (AEP) and Reliant Resources affiliates "providers of last resort" (POLR)=
for residential and small-commercial customers in all or part of 96 count=
ies within TXU Electric's service area. The POLR becomes the electricity p=
rovider for customers who have been dropped by their past provider due to =
payment problems or if their provider has discontinued service in their s =
area. AEP and Reliant will offer a retail price that is expected to be 30-3=
4 percent higher than base rates in the area taking effect January 1, 2002=
. By becoming the POLR, AEP and Reliant will acquire an additional 2 milli=
on Dallas-area customers and an expected 1-20 percent load increase. Due t=
o the higher costs associated with such an increased load the PUC was agre=
eable to the higher rate. Consumer groups are opposing the higher rates, s=
aying that low-income consumers will be unfairly hurt. Although many low-i=
ncome consumers will qualify for a 10 percent discount advocates are argui=
ng that POLR rates should equal the regular rates.
Studies Show Changing Consumer Views Towards Deregulation
A recent study by Deloitte and Touche Energy Resources Group finds that co=
nsumers are less aware of deregulation in the electric industry and more w=
ary of its potential benefits. The survey considered the opinions of 657 c=
onsumers nationwide and found that the number of consumers who are aware o=
f changes in retail electric markets has dropped to 39.7 percent, compared=
with 50.5 percent in 2000. This is a reversal in a five-year trend of inc=
reasing consumer awareness on deregulation. Analysts cited the terrorist a=
ttacks and the lack of federal legislation or debate on deregulation as re=
asons for the change. The survey also found that more consumers expect ele=
ctric rates to increase with deregulation. Deloitte and Touche's Brank Ter=
zi reports that a third of consumers expect no benefit from competition, w=
hile 26 percent expect prices to go down, 9 percent expect improved servic=
e, and 15 percent simply "don't know." Another study completed by RKS Rese=
arch and Consulting similarly found that many consumers feel that "deregul=
ation has been a colossal failure." Their study found that many consumers =
who have switched to new service providers have been disappointed because =
their service expectations were not met. RKS Senior Vice President Carmine=
Grastataro said, "customers of public power are more satisfied with the j=
ob their utility is doing than are customers of the IOUs. Although this fin=
ding has historically remained true, the difference in performance scores =
between public power and IOUs is exacerbated in states where competition i=
s under way." The study also found that consumers are more interested in p=
urchasing power through buying groups, voluntary energy curtailment progra=
ms, and on-site generation.
FERC Postpones December 15 RTO Deadline
The Federal Energy Regulatory Commission (FERC) has officially decided to =
postpone the December 15, 2001, deadline for utilities to create four regi=
onal transmission organizations (RTO). FERC Chairman Pat Wood said of the =
decision, "RTO development is in very different stages in various parts of=
the country, and it is not possible for all RTOs to be in operation by th=
e December 15, 2001, deadline established in Order 2000." The commission ha=
s approved a rulemaking order, RM01-12, that addresses the development of =
RTOs in several steps. First, the Commission will develop a broader defini=
tion of the expected functions of an RTO and how they can be achieved. Sec=
ond, FERC will seek improved input and communication from both state and f=
ederal agencies on RTO development. Third, FERC will conduct a formal cost=
benefit analysis of RTO systems. This comes in response to two conflictin=
g studies: NY ISO reports that a large Northeast RTO could cause power rat=
es to increase by $90 million, while Mirant contends that a Northeast RTO =
could save consumers $440 million. The rulemaking also calls for FERC to d=
etermine areas in which standardization can be improved. Lastly, a new "pr=
ogressive" timeline will be developed that addresses RTO development in a =
region-by-region approach. While Chairman Wood said that the commission is=
holding to its original concept of four RTOs, he also noted that the new =
order suggests that three smaller RTOs may be developed within the Western=
region. These transmission groups would include RTO West, Desert Star RTO=
, and one based on the California ISO. The rulemaking also makes a call fo=
r comments in what Commissioner Nora Brownell noted as possibly the last o=
pportunity for market participants and state regulators to make suggestion=
s and raise concerns before final orders are issued.
Ontario deregulation in doubt=20
The planned deregulation of the $35-billion Ontario electricity sector has=
been thrown in doubt by a radical proposal that would shackle the provinc=
e's electricity transmission company, preventing it from becoming a signif=
icant player in an open North American power market. The plan, known only =
to Ontario Premier Mike Harris and a few government and Bay Street insider=
s, would turn Hydro One into a not-for-profit entity instead of a fully co=
mmercial, privatized company. If this happens, Hydro One would lack the fl=
exibility to raise equity capital, make acquisitions and form partnerships=
in an effort to become one of continent's premier transmission companies =
-- a goal plainly set out by chief executive officer Eleanor Clitheroe. Da=
vid Lindsay, the president and chief executive officer of Ontario SuperBui=
ld Corp., the government's privatization adviser, confirmed that turning H=
ydro One into a not-for-profit organization, similar to Nav Canada, the ci=
vil air navigation service, is under serious consideration. "We've been as=
ked to evaluate all options for Hydro One's future, including this one," h=
e said yesterday. He would not provide details, though it is thought that =
the government wants to make a decision on Hydro One's future ownership st=
ructure by the conclusion of the year. A senior official in the Ontario go=
vernment, who did not want to be identified, said the proposal "is a step =
backward to the old days of Ontario Hydro." He was referring to the debt-la=
den utility that was split into Ontario Power Generation, the electricity =
generating arm, and Hydro One, whose network of high-voltage transmission =
lines spans 30,000 kilometres. The Premier's office would not comment. A s=
pokeswoman for Energy Minister Jim Wilson would say only that "there are a=
number of options on the table." Sources on Bay Street and at Queen's Par=
k said the idea of turning Hydro One into a not-for-profit entity is being=
propelled by Anthony Fell, the chairman of Royal Bank-owned RBC Dominion =
Securities, Bay Street's largest dealer. If the new Hydro One took this sh=
ape, it would raise about $10-billion through the sale of bonds to investo=
rs. The dealers' commission on the sale of the bonds, which would rank amo=
ng the biggest debt issues in history, would range from $25-million to $40=
-million, one Bay Street executive said. Mr. Harris is said to be keen on =
the concept partly because all the money would go back to the government t=
o help pay down the $21-billion in "stranded debt" racked up by the old On=
tario Hydro. The generating and transmission giant's decades-long spending=
spree on nuclear plants and other assets tore a huge hole in the province=
's balance sheet. Hydro One's cash flow, derived from sales to electricity=
users, would be used to pay the interest on the $10-billion of bonds. Pre=
sumably, consumers would face higher electricity charges if Hydro One lack=
ed sufficient cash to pay the interest. If Hydro One were a private company=
instead, its financial risk would be borne by shareholders, not ratepayer=
s. The United States has embraced deregulation partly because it shifts th=
e financial risk of the electricity market from taxpayers to shareholders.=
Executives at RBC Dominion declined to comment on the plan, citing client=
confidentiality concerns. Mr. Fell first proposed it to the government in=
the spring. The government wants to open up the Ontario electricity marke=
t, in which buyers and sellers can negotiate prices, by next spring. The m=
arket overhaul contemplated turning Ontario Power Generation and Hydro One=
, both of which are 100 per cent owned by the government, into commercial =
companies. In Hydro One's case, the leading options were thought to be an =
outright sale, in which the utility would be bought by another company (pr=
esumably a rival utility), or an initial public offering, where the shares=
would be owned by private investors and traded on the stock exchange. The=
third option -- converting Hydro One into a not-for-profit organization -=
- has come as a surprise. There has been no debate on this option, though =
rumours of its existence have jolted Bay Street and Hydro One, both of whi=
ch were working on the assumption that the transmission business would eve=
ntually become a commercial enterprise. Sources said that Hydro One manage=
ment opposes the not-for-profit structure because it would deny Hydro One =
the flexibility and discipline of a typical commercial business. The not-f=
or-profit structure would mean it would not have to pay taxes, which raises=
potential trade issues with the United States. American transmission comp=
anies might argue that Hydro One's non-taxable status gives it an unfair c=
ompetitive advantage. It would also deny Hydro One management the benefit =
of potentially lucrative share options. Rod Taylor, Hydro One's executive=
vice-president, would not comment on the not-for-profitoption being conte=
mplated by the government. He said, however, that the company's strategy h=
inges on its ability to become a major player in the deregulated North Ame=
rican electricity market. "Our vision of the company is to become a fully =
commercial entity, and become in the transmission sector what Canadian Nat=
ional is to the rail sector," he said in a phone interview. Stanley Hartt,=
the chairman of the Canadian office of Wall Street's Salomon Smith Barney=
, is among the Bay Street executives who opposes a not-for-profit structur=
e for Hydro One (Salomon has a small role as an adviser to Hydro One's str=
ategic business plan). In a three-page letter sent this week to the top ex=
ecutives of several large power-using Ontario companies, he said that "thi=
s idea is short-sighted and bad for Ontario." He argued that "the absence =
of an equity component in the capital structure of the not-for-profit corp=
oration essentially transfers the equity risk to the ratepayers." He also =
said that, without financial flexibility, Hydro One would lack the resource=
s to invest in "new bottleneck-eliminating connections" that would allow t=
he company to become a significant electricity exporter. "Ontario would lo=
se the prospect of becoming a true hub for North American Energy transmiss=
ion," he said. In a recent report on the power industry, TD Newcrest analy=
st David McCracken wrote, "With its operating expertise and strong balance=
sheet, Hydro One is well positioned to act as a consolidator of transmiss=
ion grids in the northern United States, where ownership tends to be fragm=
ented." He noted that Hydro One is expected to be privatized in the next f=
ew years, and he said the utility has "the opportunity to lever strengths =
from traditional wires businesses into competitive high-growth initiatives=
." According to sources familiar with the not-for-profit proposal, Hydro O=
ne would be governed in the best interests of all electricity users by sto=
cking the board of directors with appointees from corporations that are he=
avy power users, such as auto and steel makers and paper companies. Such a=
structure exists at Nav Canada, with airline executives on the board, and=
the company has been able to cut the fees it charges customers. Restructu=
ring Hydro One with debt, rather than equity, is also presented as the mos=
t efficient way to capitalize the company. "The problem with a Canadian Na=
tional Rail-style IPO is that equity is much more expensive than debt," sai=
d one financier familiar with the proposal. "With a debt-based structure, =
every dollar earned is available to pay interest, while an equity-based st=
ructure means you pay federal taxes, provide a return to shareholders and =
make debt payments." Dofasco Inc., the big Ontario steel producer that con=
sumes about $100-million of electricity a year, supports the not-for-profi=
t proposal. Gord Forstner, head of communications, said a bond sale would =
reduce Ontario Hydro's stranded debt by $10-billion immediately, paving th=
e way for lower electricity charges. Currently, a special levy on all elec=
tricity bills is being used to whittle down the debt. The charge costs Dof=
asco alone about $15-million a year. "We want to see the stranded debt pai=
d down first," Mr. Forstner said. "Until that happens, we don't favour Hyd=
ro One going to the expense of expanding outside of Ontario's boundaries."
Retail Access Requested in California
The Alliance for Retail Energy Markets (AReM) has asked the California Sup=
reme Court to overturn the state Public Utilities Commission's September 2=
0th decision that suspended direct retail access across the state. The con=
sumer group, comprised of American Utility Network, the Alliance for Retai=
l Energy Markets, California League of Food Processors, Western Power Trad=
ing Forum, Strategic Energy, AB&I Foundry, Tricon Global Restaurants and S=
chool Project for Utility Rate Reduction, has argued that the ruling was m=
ade without due process and that the Court had no right to abrogate contra=
cts retroactively. "It is our hope that the Supreme Court recognizes the P=
UC has acted in complete disregard of our constitutional rights and has rus=
hed to judgment on this issue, without hearings and without creating a pro=
per evidentiary record," said AReM Attorney Dan Douglass. PUC Commissioner=
Carl Wood has maintained that the PUC issued the order because it believe=
d that consumers have hastily signed contracts with competitive suppliers,=
leaving fewer customers to pay for the state's wholesale power costs. ARe=
M is disputing the claim, saying that only a limited number of customers s=
witched suppliers during the summer of 2001.
Plant Construction Influences Florida's Wholesale Market
California based Calpine Corporation announced that it has begun construct=
ion of a 530 megawatt power plant in Auburndale, Florida. The construction=
brings Florida closer to deregulation, as Calpine is one of the few out-o=
f-state generating companies to successfully penetrate Florida's wholesale=
electricity market. Other companies, such as Enron, have attempted to con=
struct new power plants in the state, but have been unsuccessful due to co=
mmunity and regulatory resistance. Florida's stringent Power Plant Siting =
Act makes it very difficult for out-of-state companies to enter the market=
. Calpine has succeeded by agreeing to sell the output from the Auburndale=
plant under a long-term contract to one of Florida's existing utilities, =
Seminole Electric Cooperative. In addition, Calpine has been working with =
the Florida Partnership for Affordable Competitive Electricity to persuade =
lawmakers and Governor Bush to deregulate Florida's wholesale market. Flor=
ida's Energy 2020 Study Commission, which is responsible for the state's c=
ompetition plan, has endorsed a proposal to allow out-of-state companies t=
o enter Florida's wholesale market by building new plants and selling powe=
r to the state's incumbent utilities. The Commission has also suggested el=
iminating the power of state government to approve power plant development=
and limiting the ability of local governments to block projects. The Comm=
ission is expected to issue a final report on December 1, 2001.
Florida PSC Approves Independent Power Line Operations
The Florida Public Service Commission (PSC) has approved the transfer of t=
he state's power lines from utility jurisdiction to an independent company=
. The PSC has asked Florida's three main utilities, Florida Power and Ligh=
t (FPL), Florida and Power Corporation, and Tampa Electric, to devise a pr=
oposal within 90 days that will turn over operation of the power lines to =
an independent system operator. Commissioner Michael A. Palecki said that =
the decision was made in the best interest for ratepayers, utility compani=
es and independent power companies seeking a competitive market. Under an =
earlier proposal submitted to the PSC, the utilities proposed a statewide =
regional transmission organization, GridFlorida, that would have owned and=
managed the power lines. The PSC did not approve the plan, as it would ha=
ve moved jurisdiction of retail rates to the Federal Energy Regulatory Com=
mission.
New England Congressmen Seek Equal Representation on RTO Board
Twenty-three U.S. congressmen from New England requested that their states=
be given adequate representation on the governance of the Northeast Regio=
nal Transmission Organization (RTO.) In an effort organized by Representat=
ive Edward Markey (D-Mass), the bipartisan delegation of congressmen wrote=
a letter to the Federal Energy Regulatory Commission (FERC) asking the re=
gulators to create a governing board comprised of equal numbers of represe=
ntatives from New England, New York, and the Mid-Atlantic. "We view an equ=
ally balanced governance structure as the only way in which a single marke=
t design can be implemented which would truly benefit the consumers of all=
the regions," Markey said. FERC has been considering several options for =
structuring the board that will oversee the unified Northeast wholesale po=
wer market. One proposal gives five seats for representatives from the Mid=
-Atlantic, three seats to New York, and two to New England. ISO New Englan=
d and New York Independent System Operator joined the congressman in oppos=
ing that plan and requesting equal representation.
California Wants Consumers to See Real Power Costs
In a move that may prevent a repeat meltdown of the wholesale electricity =
market in California, the California Consumer Power and Financing Authorit=
y wants to install electricity meters that charge consumers the real cost =
of power. Currently consumers pay the same price for electricity throughou=
t the day even though the wholesale price varies every hour. Therefore, co=
nsumers have no incentive to conserve during peak times. The meters will c=
harge residential consumers more for power used during peak hours, when de=
mand is highest and less during off peak times. The authority issued reque=
sts for proposals, due by November 15, for a minimum of 10,000 real-time m=
eters, the cost of which varies between $200 and $1,000. The power authorit=
y plans to finance the purchase of the meters and will market them to cust=
omers of Pacific Gas & Electric, Southern California Edison, San Diego Gas=
& Electric and dozens of municipal utilities. As consumers have shown to =
be responsive to price signals in a pilot program in Washington, Californi=
ans too can expect to reduce their energy consumption. Project manger, Kev=
in Wood of Southern California Edison hopes his company will install meter=
s for 11,000 customers by next summer. He said that if these customers, wh=
o represent 20 to 30 percent of the load, respond to price signals during =
peak hours, this may in turn drive down wholesale prices for all users. Wh=
ile consumers may benefit, the decrease in consumption may cost power gene=
rators millions of dollars in revenue.
Environmentalists and Union Coalition Oppose Deregulation in Indiana
A coalition of union members from several groups showed their opposition t=
o electric utility deregulation in Indiana during a peaceful demonstration=
on November 7. The coalition, know as People's Energy Campaign, includes =
members from UNITE Local 399, formerly the Ladies Garment Workers Union, t=
he Central Labor Council, Valley Watch environmental group, and the Citize=
ns Action Coalition. Denny Owen, an executive board member of UNITE Local =
399, expressed the general concern of the coalition that deregulation shou=
ld be discouraged. "We don't think it'll make prices lower, it'll make the=
m go higher," Owen said. Indiana is considered to have low utility rates c=
ompared to other states. Indiana lawmakers are considering deregulation as=
newly introduced legislation proposes to create an Energy Policy Commissi=
on that would craft a comprehensive energy plan for the state. Senator Gar=
d and other General Assembly members created the bill to address the state'=
s need for a true energy policy and as a means to address future electric =
load growth. "Merchant power plants have been a divisive issue in the past=
year and a half," Gard said. "There are many people who feel if the state=
has a comprehensive energy policy, it might be better able to deal with t=
his issue. And we also have to pay attention to what's happened in Califor=
nia." The bill would set up a temporary commission with appointed members =
representing various stakeholder groups including state government, indust=
ry, labor, and environmental groups. The commission is scheduled to presen=
t a final report to the governor in December 2002. While electric deregula=
tion would not be a prime focus of the commission, the "specter of deregul=
ation" would have to be examined in some fashion, Senator Gard said. SB 23=
3 has been sent to the Senate Rules and Legislative Procedures Committee. =
Senator Gard predicts it will pass the Senate, although chances in the Hou=
se of Representatives are less favorable.
Debate Over Oklahoma Transmission System's Readiness to Serve Future Load
The Electric Restructuring Advisory Committee met with industry officials =
on November 7 to discuss the future capabilities of Oklahoma's transmissio=
n system. The committee is responsible for researching the capabilities of=
the system, determining whether upgrades are necessary, and delegating th=
e responsibility for paying for such upgrades. With new power plants being=
developed and proposals to open the state to a competitive electric marke=
t in progress, concern has risen as to whether the transmission system can=
handle the increased load. Stanton Hadley of Oak Ridge National Laborator=
y reported that electricity demand in Oklahoma is expected to grow 26 perc=
ent, to 14,350 megawatts by 2010. The transmission system currently is abl=
e to handle only 13,300 megawatts. Nevertheless, power companies are plann=
ing 13,500 megawatts of new power generation. Calpine Corporation is spend=
ing about $20 million on transmission improvements between its power plant=
near Coweta, Oklahoma, and the outlying region. Also, Public Service Comp=
any of Oklahoma plans to spend $40 million on transmission upgrades over t=
he next few years. With the new power plants and a supply surplus expected=
, Hadley also said that consumers could expect lower costs. John Wright, o=
ne of the committee members questioning this assumption, said that in a de=
regulated market, the utilities are likely to sell their power out of state=
. If this were to occur, lower power prices would be unlikely. The Electri=
c Restructuring Advisory Committee will deliver a report to the Legislatur=
e at the end of the year.
Thirty New Power Plants Proposed for Virginia
The latest news out of the deregulation of Virginia's electric power indus=
try centers around thirty proposals for new power plants in the state. Whi=
le the surge in supply is expected to prevent a California-like energy cri=
sis, health and environmentalists argue that the air pollution and smog fr=
om the plants could damage the state's parks and forests. Since 1998, when=
the state announced its plans to open its energy markets to competition, 3=
0 companies and utilities have asked for state approval to build new plant=
s. Activists complain that the new power would not even benefit Virginia's=
customers, as the energy is intended for delivery in northeastern states.=
By building plants in Virginia, utilities avoid the Northeast's stringent=
environmental regulations. An advisory group composed of utility and indu=
stry representatives argues that new plants pose no significant risk. They=
stated that 28 of the new plants would run on cleaner-burning natural gas=
and that other federal regulations would require older plants to reduce h=
armful emissions by 65 percent by 2004. The representatives also expect th=
at only a few of the plants will actually be built due to market condition=
s and cooling-water shortages.

Copyright ? 2001 Egnatia Research & Management. All rights reserved