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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

California Capsule: Davis' Consultants Could Cost $30 Million

LCG, July 3, 2001Consultants, it is said, are people who borrow your watch, tell you the time and send you a bill for "professional services." Those hired by California Gov. Gray Davis have already cost the state $2.8 million and the total bill for their professional services could exceed $30 million.

Documents made public yesterday by state Controller Kathleen Connell provide a look at the high non-productive costs of the state electricity crisis as it is being handled by Davis.

Two firms, hired by Davis to advise him on his apparently doomed plan to buy the transmission assets of California's investor-owned utilities, could be paid as much as $14.6 million if the deal for the wires were to ever get past a very leery legislature. The Blackstone Group and Saber Partners would get commissions on the deal, so it is in the interest of the consultants to not only get the transaction done but to get it done at the highest possible cost.

Davis has also hired consultants to represent the state before federal regulators, financial analysts to reinforce his conclusions about out-of-state power producers, specialists in energy trading to assist the California Department of Water Resources in purchasing power and about 20 other savants, pundits, mavins and gurus.

Peter Drucker, the writer on management, once said the word "guru" was popular because so many people had trouble spelling the word "charlatan."

The Electric Power Group of Pasadena has already been paid $847,000 to advise the state on how to develop a portfolio of power purchases and could bill the state for as much as $6.2 million. The water agency, which makes the purchases, defended the advice.

"Right now, we're probably the largest buyer of power in the nation, if not the world, and we had to inject very quickly some experience in power operations that could help us overcome the crisis," said spokesman Oscar Hidalgo. "That was a decision that we felt was the best way to go."

The Washington, D.C. law firm of Grammer, Kissel, Robbins, Skancke & Edwards stands to make $1.5 million for representing the state before the Federal Energy Regulatory Commission.

San Franciscan Harry Dorsett, a self-described "news junkie," asked "what are we paying our state government for? Doesn't anyone in Sacramento know how to get their job done without calling for outside help?"

ISO Declares Stage 1, Stage 2 Power Alerts
The keepers of the California transmission grid flirted yesterday with calling a Stage 3 Power Emergency, which could have triggered rolling blackouts in the state.

The California Independent System Operator, which controls three-quarters of the state's grid, warned in the early afternoon that blackouts were "a possibility" but skirted the problem as loads dropped. The ISO had called a Stage 1 Power Emergency earlier in the day, followed by a Stage 2, as reserves dropped below 5 percent.

If blackouts had occurred, they would have been the first since May 8.

ISO spokeswoman Stephanie McCorkle said weather should continue hot today but demand should be lighter due to the "Friday effect" with loads normally lower on the day before a holiday. Today, of course, is Independence Day.

The problem was exacerbated when both units of the 1,580 megawatt Mohave coal-fired plant near Las Vegas went off-line. Southern California Edison Co. operates the plant and has ownership interest in 885 megawatts of its output.

For today, Cal-ISO is predicting a peak demand of about 42,500 megawatts with around 44,200 megawatts of available resources, which would provide a 4 percent reserve. But the ISO is planning on being able to import 4,610 megawatts from out of state, and the rest of the West is hot, too.

Price Controls Dampen Power Sales to State
As a by-product of FERC's new controls on wholesale power prices in the 11 Western states, out-of-state power producers and marketers withheld electricity from the California market yesterday as the state labored under a Stage 1 and then a Stage 2 Power Emergency.

The unforeseen effect of the price controls was laid to uncertainty over what price would be paid for power bid into the system. Sellers of power pulled about 1,500 megawatts of electricity off the table at mid-afternoon because of uncertainty about how much they could charge under the new pricing system, according to water agency spokesman Oscar Hidalgo.

"They didn't understand what they were going to be paid; there was confusion over the FERC order," Hidalgo said. "We saw 1,500 megawatts disappear."

When power reserves in California had shrunk to less than 7 percent yesterday, triggering a Stage 1 alert, the uncertainty began, Hidalgo said. Under FERC's controls, prices cannot exceed 85 percent of the price allowed during the previous alert, and there had been no previous alert under the new system.

About 3:00 p.m. yesterday, prices dropped from $101 per megawatt-hour to about $77. They rebounded to $98 by 5:00 p.m., according to Cal-ISO. Those prices include a 10 percent premium charged in California because of the added credit risk in the state.

Owners of power plants in California must operate their plants if called upon by the ISO to do so, but out-of-state suppliers are no so governed. Hidalgo said it was the power sources in other states that dried up suddenly.

Kern River Gas Pipeline Expansion Finished
The Williams Cos. said yesterday its Kern River Gas Transmission unit had completed an expansion of its pipeline facilities that carry natural gas from Wyoming into California that will permit an addition 135 million cubic feet of gas per day to be delivered to the energy=-starved state.

Most of the new gas will go to fuel power plants, Williams said in a statement. The project will provide nearly enough gas to add 1,000 megawatts of generation to California's meager resources.

The project, announced on March 15, was completed in record time. "We received FERC approval within three weeks of filing -- an unprecedented turnaround. This allowed us to expedite the construction process and bring additional supplies of natural gas to the California market," said Kirk Morgan, director of business development for Kern River.

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