LCG Publishes 2024 Annual Outlook for Texas Electricity Market (ERCOT)

LCG, October 10, 2023 – LCG Consulting (LCG) has released its annual outlook of the ERCOT wholesale electricity market for 2024, based on the most likely weather, market, transmission, and generator conditions.

Read more

LCG Publishes 2024 Annual Outlook for Texas Electricity Market (ERCOT)

LCG, October 10, 2023 – LCG Consulting (LCG) has released its annual outlook of the ERCOT wholesale electricity market for 2024, based on the most likely weather, market, transmission, and generator conditions.

Read more

Industry News

California Capsule: Davis Takes on Reliant Energy

LCG, May 17, 2001California Gov. Gray Davis has branded independent power producers enemies of the state, and appears to want them to stay enemies through a summer of expected power shortages.

As the dying man told the priest at his bedside when asked to renounce the devil, "Father, in my condition I can't afford any new enemies." That is a lesson the governor has not learned.

Yesterday, Davis focused on Reliant Energy Inc. of Texas, warning the company he had branded as among "the biggest snakes on the planet earth" that the company's continued "obstructionist" behavior will determine whether he signs a "windfall profits" tax bill or even seizes the company's power plants."

"We have a very tough summer ahead of us (and) we need their full cooperation," the governor said. "I reserve the right to do what is in the state's best interest. I think it is fair to say that Reliant is not off to a good start."

Earlier yesterday, Davis signed legislation creating a California power authority and threatened the power producers "If they don't want to see their plants seized, they should make sure their plants are up and running this summer."

Reliant, like the other power producers, is getting tired of the governor's intemperate rhetoric, but is alert to the possibility of irrational behavior. "We would hope," said Reliant spokesman Richard Wheatley, "that draconian measures and political rhetoric and finger-pointing would not be pursued. But there is a history of confiscatory actions, including seizure of power contracts with other companies."

Wheatley is correct. Earlier this year, when pacific Gas & Electric Co. and Southern California Edison Co. were about to auction off their contracts with so-called qualifying facilities in order to raise funds to pay those generators, the governor used his emergency authority to seize the contracts.

"Regardless of what happens," Wheatley said, "we're going to make every effort to keep our contacts with the state on a high plane, despite the political rhetoric, despite the name-calling and despite all the allegations that have been made."

FERC Allows Qualifying Facilities to Sell in Open Market
The Federal Energy Regulatory Commission yesterday ordered that California's qualifying facilities independent power plants built in response to the Public Utility Regulatory Policies Act of 1978 (PURPA), -- be allowed to sell excess power to third-party purchasers, such as traders, who could then sell it to the highest bidder.

FERC also said that if the generators could free themselves from their contracts with utilities, they could sell all their power in the open market.

The federal regulators saw the action as making it easier for the companies to bring their power to market this summer. It is estimated that together they produce up to a quarter of California's electricity. Non-payment of some $1.5 billion by PG&E and SoCal Ed, and an inability to get their power to market, have caused the QFs to cut production by about 3,000 megawatts.

California's governor was outraged. "Clearly, we want to make sure the QFs get paid," said Davis' press secretary Steve Maviglio, "but we don't want them going to the open market to get paid 10 or 20 times the contract rate."

Davis said he would ask California Attorney General Bill Lockyer to intervene in any case where a QF tries to get out of a contract to supply power at reasonable prices.

State Lawmakers Seek Power Purchase 'Cartel'
Nine Assembly Democrats said yesterday that California, Oregon and Washington ought to get together and tell power producers "Here's what we'll pay take it or leave it."

The states would set a predetermined price that would give generators a "reasonable" profit and refuse to pay more, even if blackouts ensued. And blackouts would ensue, admitted the bill's author, Democrat Assemblyman Paul Koretz, but they will happen anyway, he said, and the cartel's price caps would allow the state to predict and manage the outages better.

Assemblyman Fred Keeley, also a Democrat, said it would be far better if FERC set price caps, but he doubted that the agency and the Bush administration will reverse their opposition to price controls. He said that means that California has to cap the rates itself, and that means the three states have to act together.

Keeley and Koretz dismissed objections that generators would simply sell their power into other markets, saying California is too large a market for them to ignore. Koretz, referring to the newly-created California power authority, said the state could seize the power plants if generators refused to sell power in the state, but Kelley had reservations about that.

Economists: Blackouts Worse than Rate Hike
Higher electricity bills will be less disruptive to state's economy than severe power outages, economists agreed in the wake of Tuesday's whopping $5.7 billion rate hike ordered by the California Public Utilities Commission.

Edward E. Leamer, director of the UCLA Anderson Business Forecast, said he hadn't reached any firm conclusions as yet, but his impression is "higher energy costs by themselves don't have that big of an effect, but (blackouts) are another story."

Alex Fischer, head of economic development for the state of Tennessee, agreed. "Downtime and lost production are huge expenses" compared with rate increases, he said. Fischer recently led a recruiting mission to Southern California.

Stephen Levy, director of the Center for Continuing Study of the California Economy, said rate increases "are part of the solution" to the state's energy problems. "It goes under the heading of things that aren't pleasant, and that do subtract from growth, but aren't debilitating.

"If we run huge blackouts this summer, it would be much more disruptive for the economy and for our quality of life," he said.

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