Benchmarks

Developers of new capacity may find that the plant retirements they're counting on are further off than expected.

Strong economic growth, an abundance of older, inefficient power plants, strategic access to gas supplies, and a relatively isolated electricity market have attracted scores of developers to Texas. In 1999, the reserve margin in Texas shrank to 9.5 percent. However, more than 10,000 megawatts of capacity is under construction in the state, totaling a 16 percent increase in supply. Financing has closed or purchase power agreements have been secured for another 2,000 MW.

RDI projects that a 16 percent increase in supply could cause electricity prices to fall to as low as 2.1 cents per kilowatt-hour. If no existing supply is retired, electricity prices could remain below the cost of new entry for more than five years.