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San Francisco Chronicle November 28th, 2001
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Power glut may doom new plants State says 31 proposed generators probably will not be needed Sacramento -- A state agency created earlier this year to finance new power plants as insurance against electricity shortages has halted negotiations with companies that want to build natural gas-fired generators. Thirty-one proposed projects that would have added more than 3,200 megawatts of electricity by next summer have been held up as officials of the California Power Authority determine whether the plants are needed. With reports suggesting that California will survive next summer without blackouts and the state facing a glut of power as a result of long-term contracts with energy suppliers, the power authority isn't in a hurry to erect more natural-gas-fired plants, officials said. "It's looking less and less likely that these projects will be needed by next summer," said Amber Pasricha, a power authority spokeswoman. The Legislature and Gov. Gray Davis created the authority in May as an energy safety net for the state. Using $5 billion in revenue bonds, the idea was to create state-financed peaker power plants to be used during shortages. But companies that had signed letters of intent with the power authority to build new plants have been told this month that those plans are being shelved for now. Californians' much-improved conservation habits, along with new plants that have come online this year, have helped stabilize the energy crisis. And $43 billion worth of contracts the governor signed with energy suppliers to provide power have forced the state's energy-buying agency, the Department of Water Resources, to sell off excess power at a loss. "We don't have any guarantee from DWR that they'll buy the power (from any new peaker plants)," Pasricha said. Peaker plants are typically run during times of peak demand, such as hot summer days. Authority officials had said earlier this year that the state needed to build dozens of peakers, an opinion that has slowly changed. The authority is instead focusing on financing renewable energy projects, such as wind farms and conservation programs. The authority has signed letters of intent with numerous companies that could create as much as 2,271 megawatts of alternative energy. The renewable projects are less reliable and cannot always be counted on during times of high demand. One megawatt is enough power to light 750 typical California homes. The move away from building more power plants was applauded by one energy expert. "The days of blackouts are over," said Peter Navarro, a professor of business at the University of California at Irvine who studies the state's energy market. "We have an embarrassment of power riches." Navarro said the energy contracts -- which he called one of the worst public policy decisions in the history of California -- provide too much power to the state, at far too high a price. "Those contracts call for so much power, there's no need for any more," he said. Whether the peaker plants will ever be built remains in question. S. David Freeman, the chairman of the power authority and the Davis adviser who helped negotiate the contracts, suggested at a hearing Monday that the power authority could instead use its money to provide low-cost financing to companies building plants that are already doing business with the state as an incentive for the companies to renegotiate their contracts.
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