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Fortnightly Magazine - July 15 2002
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Late for dinner? Blame Enron. Go ahead. It may seem unfair to blame another for something you did wrong, but the post-Enron political climate makes it easy to do. California politicians already are hip to this strategy. But, blaming all of California's woes on Enron is less than politically honest and may have far-reaching effects on power markets.

Recent data confirms that in the wake of the Enron collapse and subsequent revelations of industry accounting and trading scandals, the power sector largely has curtailed expansion plans. According to Platts NEWGen database, over 150,000 MW now have been permanently cancelled or postponed by North American power developers. The RDI Power Outlook forecast for the 2nd Quarter 2002 concludes that despite the cancellation trend, shortages are not likely for the foreseeable future. Rather, the trend represents one step toward a rationalization of power markets. In fact, 133 GW of new capacity are still under construction and moving forward. Also, many of the tabled projects represent postponements and are still viable projects waiting for a better time to enter the market.

But, California's political climate is forcing players there to take actions that aren't necessarily rational. California recently has seen a spate of cancellations despite the strong price signals sent to developers during power shortages in 2000 and 2001. Almost 15,000 MW set to be built in California have been cancelled in the last six months. Some of those projects already were under construction.

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