California ISO bidding on 2,000 Mw of new generating capacity

After the harrowing summer of 2000 and facing a potential 5000 Mw shortage next summer , the California Independent System Operator (ISO) is taking the bold step of buying 2,000 Mw of new electric generation capacity to avert blackouts. The ISO will have the right to call on the power for up to 500 hours each summer season (June 1-Oct. 31) in exchange for a capacity payment over a 5-year period. The ISO board authorized payment of up to $255 million/year.


Ann de Rouffignac
OGJ Online

After the harrowing summer of 2000 and facing a potential 5000 Mw shortage next summer, the California Independent System Operator (ISO) is taking the bold step of buying 2,000 Mw of new electric generation capacity to avert blackouts.

The ISO will have the right to call on the power for up to 500 hours each summer season (June 1-Oct. 31) in exchange for a capacity payment over a 5-year period. The ISO board authorized payment of up to $255 million/year.

�We put out a request for bids for capacity to get peaking units built,� says Patrick Dorinson, spokesman for the ISO. �We�re not in the generating business. We just want the capacity.�

Beyond electricity committed to the ISO, the owners of the new plants can sell extra power generated by the plants into the open market. Dorinson said the peakers will be built near substations mostly in northern California.

�We never anticipated the ISO would take on the responsibility of stimulating development of generation resources this directly,� said Terry Winter, CEO of the California ISO. �However, if we do not assume this role, we will be increasingly challenged in our efforts to protect consumers from suffering rotating blackouts next summer.�

The cost of the power will be passed through to utilities who buy the power, Dorinson says.

Faced with shortages of power generation this past summer, it was a daily challenge to keep the lights on in California. The ISO is predicting a 5,000 Mw shortage for summer 2001, worsening the challenge of keeping the lights on.

�This move won�t save the day but will certainly help,� says a source at a large merchant generator with California operations.

Adding 2,000 new megawatts to a 40,000 Mw system is significant. But observers say it won't solve the problems of shortages and spiking prices that California experienced this summer. Solving that problem will require speeding up the siting process for new power plants to meet skyrocketing demand, observers agree.

The ISO received numerous bids, says Dorinson, but he declined to say how many. Industry sources confirmed there is intense interest in the proposal. Wednesday, the ISO received board authorization to begin negotiating with bidders.

The California Energy Commission which must approve all power plants and oversee environmental permitting did not return calls by deadline.

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