PG&E; Selling 4 Plants as Part of Utility Rule
To comply with a regulatory mandate to dim its “market power,” Pacific Gas & Electric Co. said Tuesday it will sell four plants that account for about 15% of its power generating capacity.
The order that major investor-owned utilities sell power plants is a principal tool the state’s Public Utilities Commission is using to loosen the grip of the state’s power monopolies over the energy market and, over time, give consumers and businesses the option of choosing their power suppliers in a free, competition-driven market.
Ostensibly, the sale would do that by attracting outside energy companies as buyer-operators of the power plants, introducing new competitors to the state’s $20-billion electricity market.
Although the sale of the plants was not written into the new power deregulation law signed by Gov. Pete Wilson last month, PG&E; and Southern California Edison were directed by the PUC last December to sell off half of their fossil fuel-powered generating assets, or about 15% of their total megawatts.
Fossil fuels account for about 30% of PG&E;’s total capacity, hydroelectric 20%, nuclear 20% and alternative sources such as solar, wind and geothermal, 30%.
San Francisco-based PG&E;, the nation’s largest utility with more than 4.5 million customers, said the plants have a combined book value of $400 million and 3,059 megawatts of power. They are located in Morro Bay, Moss Landing, Oakland and in San Francisco at Hunters Point.
Edison has not yet decided which plants it will sell, a spokesman said Tuesday. San Diego Gas & Electric, the state’s other major investor-owned utility, generates only 40% of its own power so it is not subject to the divestiture mandate.
Prospective buyers could include the many power marketers, such as Enron Corp. of Houston, Duke/Louis Dreyfus of Wilton, Conn., and others now setting up to grab a piece of the California power market once deregulation begins in January 1998.
“Logical buyers could be companies like Duke who know how to operate generation assets,” said Simon Rich, chief operating officer of Duke/Louis Dreyfus, a partnership of the Duke Power utility of Charlotte, N.C. and Louis Dreyfus, a natural gas trader.
The sale of power plants by U.S. utilities will become a regular occurrence as deregulation unfolds, state by state, Rich said. Utilities in Massachusetts will be probably the next to sell off plants, he said.
The PG&E; plants on the block have 300 employees. Realizing their job security was in jeopardy, lawmakers who drafted the power deregulation bill over the summer set aside about $100 million in pension settlements, job retraining grants and other benefits for utility employees who lose their jobs.
The bill also stipulated that employees at power plants that are sold cannot be laid off until at least two years after the facilities are sold.
