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		 Subject: Utilities, Electric: Deregulation: California Electricity 
Management Agency Approves ...


 
California Electricity Management Agency Approves Temporary Power Plants 
Anne C. Mulkern 
? 
10/05/2000 
KRTBN Knight-Ridder Tribune Business News: The Orange County Register - 
California 
Copyright (C) 2000 KRTBN Knight Ridder Tribune Business News; Source: World 
Reporter (TM) 

State electricity managers voted Wednesday to pay private companies as much 
as $765 million over three years to build and run temporary power plants 
aimed at preventing blackouts next summer.

The Independent System Operator, the agency that controls 75 percent of the 
state's power grid, said it had no choice but to approve the plants, which 
can generate a combined 2,000 megawatts -- enough to power 2 million homes. 
Even with those new plants, the estimated demand for electricity next summer 
exceeds supplies by about 3,000 megawatts. 

Calling the state's deregulated electricity market "a complete train wreck," 
board members said they needed to act immediately.

Under legislation passed last month, smaller plants can be approved in as 
little as four months. But applications for those plants have to be submitted 
by Oct. 31.

The plants, which can be built by June 2001, are more expensive to run and 
pollute more than larger plants. They will only run on days of peak demand.

The cost of building and running the new plants likely will be passed on to 
ratepayers, but the details have not been worked out. Board members could not 
say how much it would cost each consumer.

Electricity prices surged this summer when demand for power exceeded 
supplies. Under deregulation, which began in 1998, the ISO pays whatever it 
deems necessary to buy more electricity in an emergency. The agency has spent 
more than $100 million this year for such purchases, a cost paid by consumers 
in their bills.

Consumer advocates said the vote to approve so-called peaker plants signals a 
partial re-regulation of the state's electricity market. Companies building 
the plants will be paid a guaranteed return of 16.6 percent for at least 
three years. ISO staff will choose them from among 69 companies that 
submitted bids.

One consumer advocate, however, said the move could protect the ISO from 
spending even more.

"We're recognizing that it's not going to be appropriate to just let the 
market function willy-nilly, because it may fail," said Michael Shames, 
executive director of Utility Consumers' Action Network in San Diego. "Given 
the extreme we're at, a little more regulation makes it a little more 
reasonable." 

Folder Name: Utilities, Electric: Deregulation 
Relevance Score on Scale of 100: 97

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