Beyond the initial wave of 8,000 MW that has come on line since 1999, “There are about 10,000 MW looking for an opportunity to build out,” says Jan Smutny-Jones, executive director of the Independent Power Producers Association, Sacramento. Although “much of that construction has been deferred [or delayed] I think there’s some real opportunity to tap into that” demand, he says.


Unless California finds a way to get some of that capacity built and on line, state and industry officials warn that the state could soon face more rolling blackouts and shortages. Retirement of aging plants is expected to remove over 2,300 MW by the end of 2005, says the California Independent System Operator, the non-profit public corporation that manages the state’s grid. Another 4,900 MW may be removed by owners because the plants require air-quality retrofits or are no longer economically viable. The ISO currently assumes a base capacity of 48,787 MW.

Uncertainty about the regulatory climate is widely blamed for helping slow investment. “A lot of the projects are relatively stalled or moving very slowly,” says Gregg Fishman, spokesman for the California ISO. Twelve baseload plants representing almost 6,000 MW of new capacity permitted by the California Energy Commission are on hold or canceled.

“We have six powerplants sitting on the shelf, waiting to go,” says Kent Robertson, a spokesman for Calpine Corp., a San Jose-based power developer. Calpine needs an estimated $3 billion to complete its buildout “and Wall Street isn’t going to make that kind of funding available without the right signals from the state,” Robertson says.

Gov. Arnold Schwarzenegger wants the state Public Utilities Commission to aggressively implement an existing state law that requires competitive procurement for electricity and permit investor-owned utilities to enter into long-term contracts with developers.

A proposal by Assembly Speaker Fabian Nunez (D) would establish a “core/non-core model” allowing customers using 500 KW or more to buy power from either a utility or an independent generator. Utility interest in getting back into powerplants is “slowing down any sort of meaningful activity to get new third-party generation on line in California,” says Smutny-Jones.

s powerplant construction in California slows and aging plants are retired, there are growing concerns about a new energy crisis. State officials, utilities and power developers who would like to see the state’s regulatory patchwork replaced say modified deregulation may be the key to picking up the pace of investment and construction.