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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: Refund Judge Says State Can't Substantiate $8.9 Billion Claim

LCG, July 13, 2001The Federal Energy Regulatory Commission's chief judge said yesterday in his final written recommendation that California's claim of $8.9 billion in overcharges "has not and cannot be substantiated."

Judge Curtis L. Wagner Jr. portrayed state negotiators as obstinate, unreasonable, unwilling to compromise and possible more motivated to score political points than resolve its lengthy dispute with independent power producers accused of "price gouging."

The judge conceded that California was due some relief, he said the amount would be much less than the $8.9 million demanded by Gov. Gray Davis, and added it was unlikely that any refunds would come in cash.

"That very large refunds are due is clear," Wagner wrote in a 12-page recommendation to members of the commission. "While the amount of such refunds is not $8.9 billion as claimed by the state of California, they do amount to hundreds of millions of dollars, probably more than a billion dollars. However, the amount claimed by the state of California has not and cannot be substantiated."

Wagner also said that a recommended settlement he had proposed was "summarily" rejected by California negotiators, as was a $700 million counter offer made by power producers.

Michael Kahn, president of the state's Independent System Operator board and Davis' chief negotiator during the sessions, denied the California delegation summarily rejected the judge's proposal to bring the parties to the table, saying Wagner never came up with a specific plan or dollar figure.

Wagner also said that the amount owed the power producers by the state and its investor-owned utilities, placed at $4.5 billion by some participants in the negotiations, is far larger than any amount the state might be owed. Because of this, he recommended that any "refund" come in terms of debt forgiveness or renegotiation of long-term power contracts the California Department of Water Resources has signed.

Wagner also faulted the Cal-ISO "analysis" upon which the state bases its $8.9 billion claim, and recommended that FERC hold 60 days of evidentiary hearings rather than rely on economic analysis to determine what, if anything, the state might be owed.

Legislature to Vote on SoCal Ed Wires Deal Next Week
With Southern California Edison Co. inching closer to bankruptcy and under pressure from Gov. Davis, both houses of the state legislature said they would push for a vote next week on a plan for the state to buy the cash-strapped utility's transmission system for $2.76 billion.

Both the state Assembly and Senate have versions of the legislation that would place the burden of acquiring the wires on large users of electricity and spare residential and small commercial customers.

The $2.76 billion would provide SoCal Ed with funds to pay most of its estimated $3.5 billion debt and the utility's power producer creditors would be pressured to accept less than they are owed for past power purchases.

When Davis negotiated the deal with SoCal Ed three months ago, both he and the company said that their agreement was not admissible of changes, but both the Assembly and the Senate have many changes in mind. Any measure passed in either house would have to go through reconciliation with the other chamber.

The state legislature plans to adjourn for a monthlong summer vacation next Friday, thus the motivation to bring the bills to a vote this coming week. On Tuesday, Davis threatened to call a special session to keep legislators in Sacramento if they do not approve the Edison plan before the break.

Senate President Pro Tem John Burton, D-San Francisco, responded to the threat, saying "Only the Legislature can keep the Legislature here."

One of the plans, a bill by Sen. Byron Sher, D-Palo Alto, would have large businesses pay off most of SoCal Ed's debt and force generators to reduce by 30 percent the amount they are owed by the utility. It is unlikely that either the utility or the power producers would accept such a measure.

Burton said "We're trying to do something legislatively that protects the people and isn't a bailout for the utility."

AES Can Restart Two Huntington Beach Units
The California Energy Commission has voted to allow AES Corp. to move ahead with plans to restart two mothballed generators in Huntington Beach even without the company's guarantee that it would sell the electricity within the state.

The two units, which were retired in 1995 by the Huntington Beach plant's previous owner, SoCal Ed, have been undergoing reconditioning by AES and will add about 440 megawatts of capacity to the California grid. The company said upgrades to Unit 3 of the four-unit station are about 75 percent complete and those to Unit 4 are 70 percent finished.

State officials said they decided to drop the restriction that AES sell power within California to avoidmore delays and help fulfill Davis' executive order that the state significantly boost power production. "It adds power that will make California's power grid more secure, and the more power we can get, the more secure we are from rolling blackouts," said energy commission spokesman Rob Schlichting.

The city of Huntington Beach, convinced by recent mild weather that the energy crisis is over, objected to the ruling. City Councilwoman Connie Boardman, who testified at the hearing, said "There's a lot of impacts the residents of Huntington Beach put up with. The energy crisis is the reason this project was approved so rapidly. Now that seems irrelevant. I think it's a big waste of time."

Bankruptcy Court Okays PG&E Payments to Calpine
Calpine Corp. said yesterday the U.S. Bankruptcy Court for the Northern District of California has approved an agreement authorizing Pacific Gas & Electric Co. to assume Calpine's modified "qualifying facility" contracts.

Under the terms of the agreement, Calpine will continue to receive its contractual capacity payments plus a five-year fixed energy price component of approximately 5.37 cents per kilowatt-hour, which the company says is consistent with a recent California Public Utilities Commission Decision.

Earlier this year, independent power producers serving the California market took large reserves against earnings to cover the possibility of not being paid for electricity they served. Calpine, which is owed about $267 million by PG&E under its QF contracts, did not do so, and analysts roundly criticized the company for its faith in the bankrupt San Francisco utility.

The agreement, now ratified by Judge Dennis Montali's bankruptcy court, effectively validates Calpine's judgment.

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