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To: MetalTrader who wrote (76254)	10/13/2000 8:10:00 AM
From: Second_Titan	Respond to of 95453

A Bit off Topic / Price Uncertainty Seen Blunting New Pwr Plants In Calif But related to NG demand and government meddling in energy in general. WASHINGTON -- Efforts by California regulators to limit market volatility are blunting the development of new power plant capacity in the state, a Duke Energy (DUK) official said Thursday. "Further commitment of capital on our part, and the part of other developers, is very much up in the air in light of the current price cap initiatives," said Brent Bailey, vice president and general counsel for Duke Energy North America, Duke's competitive power plant development unit. Duke has purchased 3,000 megawatts of power generation in California's deregulated market. But the imposition of price caps in response to tight supplies and volatile prices this summer led Duke's board to seriously question plans for a 1,000-megawatt modernization of its Moss Landing plant in California, Bailey said. Duke's board expressed "significant concern" about California price cap proposals and questioned whether the Moss Landing modernization represented "a prudent investment on behalf of shareholders," Bailey said. Lengthy delay from regulatory scrutiny given proposed new power plants has contributed to California's tight supply problem, he said. Getting regulatory approval for a power plant in California can take three years or longer in California, compared with 10 months in Texas and Mississippi. "It should come as no surprise then that Texas and Mississippi have an abundance of new and planned generation and California is desperately deficient," Bailey said. Similarly, prices in Texas and other areas where plant siting is facilitated "have remained relatively low while prices in California have risen to unprecedented levels," he said. "Needless to say, the states with less regulation are the ones that favor rapid development and will continue to enjoy a sufficient, reliable and relatively inexpensive supply of electricity for consumers," Bailey said. But while the barriers to new plant development in California are high, "drastically lower price caps or the imposition of cost-based rates will do more to halt the construction of new generation than all of the other regulatory barriers combined," Bailey said. A return to cost-based rates, as some utilities and others in California have advocated, would eliminate the incentive to invest in new generation, he said. "It is essential that a developer be allowed to charge greater than marginal costs during certain times of the year when the market will bear those costs because during other times of the year the plant is forced to sit idle because of low prices," he explained. "A developer will only make the decision to build new generation if it knows with some degree of certainty that it will be able to sell energy and ancillary services at market-based rates, that that authority will continue over time, and that its revenues will not be constantly subject to retroactive scrutiny and refunds," Bailey said. Re-imposing cost-based rates "will go a long way to ensuring that no significant new generation is added in California," Bailey said. He spoke at a conference for industrial energy buyers sponsored by the Electricity Consumers Resource Council and the Process Gas Consumers.