Generators flock to get low-cost loans for new plants
Mark Martin, Lynda Gledhill, Chronicle Staff Writers
Friday, September 7, 2001
Source: San Francisco Chronicle
Despite energy companies' claims that California is a bad place to do business,
dozens of electricity generators want to cash in on low-cost state loans
to build power plants.
Giants like Enron Corp. and Reliant Energy, along with a handful of small
companies that generate electricity through windmills and solar power, have
submitted proposals to the California Power Authority. The authority has billions to spend on new power plants that would keep Californians' homes
from going dark when electricity is scarce.
Generators have complained that the state hasn't paid them in full for power
deliveries, and they say pending legislation could make it more difficult to
do business in California. But financing deals offered by the brand new power authority are too good to pass up.
"Right now, it's hard to tell if your investment will pay off," said Sandy Fruhman, spokeswoman for Reliant. "Going this route seems safe."
This morning, the five-member power authority will begin discussing proposals to build plants that would be used to bolster electricity reserves.
The authority is charged with everything from encouraging construction of
new power plants to helping low-income homeowners buy energy-efficient
refrigerators. While critics have called the agency an unnecessary new bureaucracy, its five members could have a profound impact on the state's
They have up to $5 billion to spend and are expected to soon begin signing
contracts to provide financing for companies that want to build so-called
peaker plants, which would be used when electricity supplies are low. The authority also will reserve the right to eventually own the plants -- meaning
the state's role in energy markets would continue long into the future.
The goal is to make sure California has a 15 percent energy reserve at all
times, says S. David Freeman, chairman of the authority. When power is
scarce and prices are climbing, the authority would provide cheap electricity.
"We'll be the Wal-Mart of energy," said Freeman, who is one of four
authority members appointed by Gov. Gray Davis. The fifth member is state
Treasurer Phil Angelides.
Freeman says encouraging the development of power sources that rely on renewable resources like wind and the sun is one of his top priorities.
Power plants typically use natural gas to run the turbines that produce electricity.
Skyrocketing natural gas prices last winter led in part to the surging
electricity prices that bankrupted Pacific Gas and Electric Co. and plunged the state into crisis.
The Davis administration has been criticized for shutting out renewable power
companies when it signed long-term contracts to buy electricity earlier
this year. Now, Freeman says, the power authority could use up to half of its money to fund wind farms, solar-powered generators and other plants
that rely on renewable sources.
"The renewables are a hedge against natural gas prices," he said.
Companies that have submitted proposals range from EnXco, which operates wind
farms on the Altamont Pass and in Palm Springs and the Mojave
Desert, and Yanke Energy, a Boise, Idaho, company that turns wood and other waste from landfills into power.
Details of their proposals will be released today.
Freeman said dozens of energy companies, including Enron and Reliant, had
submitted proposals to erect gas-fired peaker power plants. The state
would offer financing for the plants, which would be run by the companies.
Reliant and Enron officials both said their proposals called for their companies
to oversee the construction of the plants, but the state would own them.
The plants would be built by next summer.
Those proposals come amid increasingly heated rhetoric by the group representing power generators.
Jan Smutny-Jones, spokesman for the Independent Energy Producers, has blasted
the state for failing to fully pay companies for energy they've
supplied California. He said legislation such as a bill that would limit energy companies' profits made "countries like Bangladesh or Bulgaria more stable
places to invest in."