In the News: Recent Developments

Thursday, August 22, 2002

Florida firm pulls plug on plan for power plant

By Carrie Peyton Dahlberg Bee Staff Writer

In another sign of belt-tightening throughout the electric industry, a Florida power company has aborted its 18-month effort to win approval for a large power plant straddling the communities of Rio Linda and Elverta.

“Money is tight, and companies are going to have to be very much more selective on which plants they take forward,” said Mary Lou Kromer of FPL Energy, an affiliate of Florida Power and Light, that state’s largest utility.

“An unfavorable electric market” was one of three factors that prompted FPL to withdraw its application to build the plant, the company said Tuesday in a letter to the state Energy Commission, which oversees power plant licensing.

FPL also was daunted by time-consuming efforts to buy enough special credits to offset the pollution the new plant would have caused and by “significant community opposition,” the letter said.

“I’m extremely elated,” said Debbie Courtney, an Elverta resident who spearheaded opposition to the plant, largely over air quality issues. “We just missed something that would have been potentially lethal to our community.”

While air pollution has long been a key concern in locating power plants in the smog-choked Sacramento Valley, the latest cancellation of a 500-megawatt-plus project also illustrates the turmoil in the power industry.

Amid accounting scandals and plummeting stock prices, investors are becoming more and more reluctant to lend money to build new power plants, experts say.

It is a downward spiral that appears to be picking up speed, especially in California, where so much remains unsettled in the wake of the 2000-01 power crisis, said Joseph S. Fichera, head of Saber Partners, an investment banker who has advised Gov. Gray Davis on energy issues.

Today, about half the power plants that have won state approval for construction have delayed their start-up dates, and about half of those seeking permits have told the Energy Commission that they’re delaying their plans, some by years.

The state’s overall power outlook, however, has not worsened, said Bob Therkelsen, Energy Commission chief deputy director.

“We have a pretty good knowledge about the pullbacks for the next couple of years,” he said, noting the long-delayed FPL plant had already been removed from state supply forecasts, along with other projects the commission views as uncertain.

The state will have enough electricity to meet its needs through 2004 and possibly 2005, he said, but beyond that the picture is less clear.

It isn’t just money that is bogging down would-be builders. They’re also worried about what new rules will be set for wholesale electric markets, who will be regulating such sales and even who will be buying the power.

“All of that is in an uncertain fog,” said Jan Smutny-Jones, head of the Independent Energy Producers Association.

The Federal Energy Regulatory Commission’s proposed nationwide market rules are being opposed by many states, leaving the outcome unclear, he said.

In addition, Pacific Gas and Electric Co. remains in bankruptcy court, and no rules have been written for who will buy power for cash-strapped utilities after January, when the purchasing authority of the Department of Water Resources expires.

On top of that, the Independent System Operator, which runs much of California’s grid, is caught in a political tug of war between the state and federal governments, with FERC suing in federal court to try to oust the ISO’s state-appointed board.

FPL’s Kromer said that economic conditions will continue to play a bigger role in which power plants get built as more states jettison regulation, under which monopoly utilities built plants and were repaid through regulated electric rates.

She noted that although FPL is withdrawing its application, it isn’t totally abandoning the Rio Linda site. It might consider trying again to build there later if conditions change.

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