New Power Plant for Edison
Southern California Edison Co. said Thursday that it was moving to build its first major power plant in more than a decade -- another sign that California’s ill-fated electricity deregulation experiment is over.
Edison, a subsidiary of Rosemead-based Edison International, said it acquired an option to take over construction of a stalled 1,054-megawatt power plant near Redlands that was being built by AES Corp. before the Virginia company ran into financial problems.
The announcement of the proposed project, which would supply enough electricity to serve about 750,000 homes, came on a day of near-record energy use and as a state grid operator called for conservation. Several days into a heat wave in much of the state, electricity users served by the California Independent System Operator -- roughly 70% of the state -- used 43,008 megawatts of electricity, just short of the record of 43,609 megawatts set on July 12, 1999.
Noting the recent robust energy use statewide and high smog levels in Southern California, state energy officials said at a news conference Thursday that they were working to avert another energy crisis through a plan that seeks to squelch electricity demand and add supplies of electricity and natural gas.
“What we’re saying in this action plan is, here’s what we see the problems are, here’s what we have to do to address them ... so we don’t have a crisis,” said William Keese, chairman of the California Energy Commission, which developed the action plan with the California Public Utilities Commission and the California Power Authority.
PUC President Michael R. Peevey said the Edison proposal showed that the utility was comfortable with strides the state was making to stabilize the energy industry.
As part of deregulation, the state’s big investor-owned utilities sold their natural gas power plants and were discouraged from building new ones. But energy merchants such as AES, slammed by the 2001 Enron Corp. bankruptcy filing and low power prices, have canceled or postponed many proposed power plants in the state.
Edison International Chief Executive John E. Bryson said the utility, which is within days of paying off the last of its $3.6 billion in power debt left over from the energy crisis, wanted to build the plant even though it still lacked an investment-grade credit rating because of fears of a power supply shortfall by 2006.
“We are taking what I think is another landmark step toward overcoming the power crisis in California and moving to meet the needs of the state and our customers for power generation in the future,” Bryson said.
If approval is granted by the PUC and the Federal Energy Regulatory Commission, a utility subsidiary would complete the San Bernardino County power plant, known as Mountainview, and would sell the electricity under a 30-year contract to Edison, the company said. The price of the electricity would be tied to the cost of producing it, and profit from selling excess electricity would be credited to Edison customers, Bryson said.
Edison hopes to complete the power plant by early 2006; the company’s option must be exercised by Feb. 29, 2004.
Edison executives declined to say how much they paid for the option to buy the rights to the plant from InterGen, a Bethesda, Md.-based company that had purchased an option on the plant in March. Bryson also declined to say how much the utility expected to spend to complete the power plant, adding that such details would be filed confidentially with the PUC.
Such secrecy is unusual because the California Energy Commission requires cost disclosure during its lengthy permit process. AES had estimated that the plant would cost $800 million to build. AES had sunk more than $100 million into Mountainview and had completed 10% to 15% of the natural-gas-fueled power plant.
Bryson and other Edison executives defended the lack of disclosure during a news conference, saying it was for competitive reasons.
Edison’s proposal is the latest evidence of California’s flight from deregulation since the energy crisis of 2000-01.
The PUC has blocked energy sellers from luring retail customers away from Southern California Edison, PG&E; Corp.’s Pacific Gas & Electric Co. and Sempra Energy’s San Diego Gas & Electric Co. Wholesale energy trading has shriveled.
“California has swung as far away from the move to open markets as anybody has,” said Michael Zenker, a power and natural gas expert with Cambridge Energy Research Associates. “A lot of the old way of doing business has crept back into California.”
Utility analyst Michael Worms of Harris Nesbitt Gerard said Edison was regaining financial strength, as indicated by plans to reduce customer rates and restore a common stock dividend by the end of the year.
“Things are beginning to look better for Edison,” said Worms, who owns Edison shares and maintains a neutral rating on the stock.
