Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Generation Roundtable: Power Flux

Generators struggle to plan for the future as they cope with an unstable present.
Fortnightly Magazine - December 2003

good hedge against environmental issues. We think nuclear ought to be a key consideration as we look at maintaining affordable energy rates and reducing emissions. But the public is not ready to accept the next generation of nuclear evolution.

Markell: Nuclear is not part of our current thinking at Puget Sound Energy. At the end of the day Wall Street is the arbiter of who gets capital. The lack of political will is really a comment that we need the government to eliminate the business-model risks in such a way that capital can be attracted.

As we've gone through our integrated resource planning (IRP) process, the foundation for meeting the need has been our conservation program. We are investing about $25 million a year in conservation activity, and we expect to save or avoid 20 MW a year through the next decade. That's a critical part of what we are doing.

Also, we are trying to acquire wind-power resources for our portfolio. We have an RFP out, targeting 800 MW of renewable energy. Wind power could account for 300 MW or more of that. I expect we'll make decisions before the end of 2004 that would allow plants to begin before the end of 2005.

Wind power technology has become quite reliable. The size of the machines, their efficiency and cost have improved greatly over the last 15 years, and now we have a truly commercial-quality product supported by world-class vendors like General Electric. The economics of wind power, however, still depend almost entirely on federal production-tax credits for investors. It is a heavily tax-subsidized resource. Others will argue that coal, oil, and gas extraction are subsidized, and then you get into the whole national tax-policy debate. At any rate, tax credits as part of a national energy policy are critical for wind development.

There are half a dozen or so proven wind-resource areas in the Northwest that will support commercial development of large-scale wind farms, in the range of 150 MW or greater. The location of the resource, however, creates transmission issues. You may not have a robust transmission grid anywhere near where your wind farm needs to be. It's as dependent on a robust and well-built transmission system as any other resource.

There are other issues with wind power about its so-called true economics, and how to integrate it into a system. But the country is getting a lot of experience in those areas, and as time passes the country will become more comfortable that we can do it technically and economically.

Assets: Megawatts for Sale (Cheap)

The merchant power industry's crisis has plunged several companies into bankruptcy, and others are disposing of distressed assets (see below). In August, for example, Exelon Corp. said it would turn over ownership of seven merchant plants, totaling 3,400 MW of capacity, to a lender group led by BNP Paribas. Similarly, the bankrupt National Energy Group (NEG), a subsidiary of PG&E Corp., expects to transfer more than 5,600 MW worth of power plants in December to lender groups led by Societe Generale and Citibank.