The Natural Gas Supply Association said that electric restructuring bills proposed in Congress and by the Clinton Administration contain several provisions that could "significantly" and "unfairly" reduce the competitiveness of gas-fired electricity.
NGSA warned that utilities likely will dispatch electricity from different fuel sources in order of lowest-to-highest marginal cost, and the marginal costs of gas-fired power generally are higher than power fired by coal, nuclear and hydro. In addition, many utilities have unused coal and nuclear capacity with which to compete for new markets, largely on a marginal-cost basis.
The association said competition is likely to encourage utility efficiencies such as the substitution of some wheeling for gas-fired peaking. NGSA also said restructured, lower-priced electricity likely will reduce cost advantages of some natural gas applications.
The association pointed to three areas where present proposals could have a negative impact on legitimate competition. The first involves a mandatory set-aside for renewables as suggested in many present federal proposals, which would tend to drive from the market the highest marginal-cost electricity, usually gas-fired. Second, failure to achieve competition by a date certain, and failure to implement uniform access to an integrated grid would threaten the viability of gas-fired independent power producers. t
Lori A. Burkhart is associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.