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ERCOT 2019 Summer Quarter Outlook

LCG, May 29, 2019-- LCG released a new summer (June – September 2019) report that looks at how the ERCOT grid copes with strained network conditions. Resource adequacy analysis for the region is especially important during extreme summer loading conditions. This summer the network is under particular scrutiny as the reserves have tightened because of recent retirements.

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South Field Energy Breaks Ground for 1,182-MW Power Plant

LCG, May 16, 2019--South Field Energy LLC announced yesterday its groundbreaking for an 1,182-MW, combined-cycle electric generating facility in Columbiana County, Ohio. The natural gas-fired facility is scheduled to commence operations in mid-2021 and represents a $1.3 billion investment.

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Industry News

FERC Goes to San Diego for an Econ Lesson

LCG, Sept. 13, 2000Members of the Federal Energy Regulatory Commission held a day-long hearing in San Diego yesterday in an attempt to learn what could be got more easily from the writings of Adam Smith, who wrote his book the same year Americans declared their independence.

When demand exceeds supply, prices go up, attracting more producers to the market and eventually providing more supply at prices lower than had been the case earlier.

San Diegans, the first electricity consumers in the nation to be exposed to free-market prices, discovered this summer that use of air-conditioners, computers and other electric "necessities" increased demand for power beyond what was available. They found out when their electric bills from San Diego Gas & Electric Co. doubled and, in some cases almost tripled.

The hue and cry from San Diego has caught the attention of state and federal politicians and bureaucrats who have predictable adopted the populist view that California's deregulated electricity market is broken and needs fixing.

FERC Chairman James Hoecker said "We're prepared to do whatever it takes to help consumers in San Diego."

Stephen L. Baum, chairman, president and chief executive of Sempra Energy Inc., the parent holding company for SDG&E was one who testified at FERC's hearing yesterday. He conceded that there were some problems with the California electric marketplace, but they aren't at the consumer level.

For the short term, Baum favors selective caps on the prices generators can offer power at through the California Power Exchange, where the state's utilities are required to buy the electricity they deliver to consumers. For the long haul, he would like to see fundamental changes in the wholesale market structure.

Asked if that could mean doing away with the power exchange, Baum said "That could be a result that comes out of structural reform."

Terry Winters, head of the California Independent System Operator, said the problem was caused by lower availability of power from other states, and that is true if you have a short memory. As California's economy and population have grown in recent years, electricity demand has soared at an unprecedented rate. No new power plants have been built in the state in a decade.

Soon after the California electric restructuring bill became law in September 1996, independent power producers began applying for permits to build new generating facilities in the state. Now, four years later, there are more than 10,000 megawatts worth of new power plants in the works, but not one megawatt of new generation has been produced.

Does it take four years or more to build a power plant? Nope. Nowadays, using off-the-shelf natural gas-fired turbines, a power plant can be built in a year. Those 10,000 megawatts would give the state a healthy power surplus and San Diegans would be paying less for electricity than they did before deregulation. Where are they.

Getting a state permit through the California Energy Commission is an excruciatingly slow process, marked by interminable hearings rehashing the same subject material over and over. It can take three years to get the green light from the CEC.

But the agency is not entirely to blame for its slowness. Environmentalists and just plain anti-utility activists have discovered they can use the permitting process to obstruct the construction of new power plants, and have done so at every turn. The Wall Street Journal noted that the "Not in My Back Yard," or NIMBY attitude, has given way in California to BANANA, or "Build Absolutely Nothing Anywhere Near Anyone."

The independent power producers in California, who purchased their plants from the state's three investor-owned utilities and sell the power back to them through the power exchange, have had a good summer at the expense of San Diegans. John Stout, a vice president of Texas-based Reliant Energy Inc., said "The fact that we had a good year in California, in terms of revenue, is a fact. I don't deny that at all."

Bill Hall, a Duke Energy Corp. official, said "We don't anticipate to make profits like this as soon as supply keeps up with demand."

And that's the way a free market works. When supply catches up with demand, wholesale electricity prices will be paid to the lowest offerer. And those prices will be passed through to consumers without a markup. Even those in San Diego.

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