Generators Urge Regulators to Issue an RFP

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, March 26, 2004 Share this on FacebookTweet thisEmail this to a friend

One of the more pressing issues facing state policymakers is the need for investment in new electricity generation resources. Since the energy crisis in 2001, nearly all of the new power plants slated for construction have been postponed or canceled due to a combination of factors: low wholesale electricity prices, the Enron scandal, regulatory uncertainty and reluctance by Wall Street to finance new electricity generation projects.

In March 2003, the California Public Utilities Commission (CPUC), Energy Commission (CEC) and Power Authority jointly proposed an Energy Action Plan which called for, among other things, the addition of 1,500 to 2,000 megawatts of new generation per year to meet future demand. In the year since the plan was released, the ambitious goal for new resources is still only just a goal.

Meanwhile, the CPUC's resource procurement proceeding moves along at a snail's pace as the utilities grapple with how to meet future demand while satisfying their shareholders’ bottom line. The most significant development with regard to new resource additions occurred last month when the Federal Energy Regulatory Commission issued a ruling clearing the way for Southern California Edison (SCE) to enter into a long-term power purchase agreement (PPA) with its affiliate, Mountainview Power Company. SCE entered into the PPA with Mountainview, a wholly owned affiliate, without seeking competitive alternatives through a "Request for Proposal" process.

The non-utility power generators say it is time to get off the dime and “put action into the Energy Action Plan.” On March 24, the Independent Energy Producers Association (IEP) came up with a plan that is disarmingly simple: have regulators issue a request for proposals (RFP) for at least 5,000 MW of power, phased-in over the next four years, and do so through an open, transparent and competitive procurement process.

IEP points to the 10,000 MW of licensed, yet unbuilt power plant sites that could be realized if an RFP were issued. “These permits are aging and may expire,” wrote Jan Smutny-Jones in a letter to regulators. “Unless given the opportunity to develop these licensed sites, the time and money spent by the CEC and the developers will be wasted.”

IEP’s proposal makes good sense. CMTA and its members are interested in seeing that the state's three investor-owned utilities procure the lowest cost and most reliable resources that are available, regardless of the source, and that the only way that the utilities and the regulators can demonstrate that this standard has been met is through an open and fair competitive bid process.
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