California debates future of deregulated market

After several months of hot weather, price spikes and brownouts across the state, electricity companies in California have begun to question the operation of its deregulated market and look at ways of preventing the same crisis occurring next year.

Two of California’s utilities, Pacific Gas and Electric Co. (PG&E) and Southern California Edison Co. (SCE), are seeking permission to pass $2.2bn of losses on to their consumers. They have also asked for the rate freeze on retail prices to be lifted.

The California Municipal Utilities Association (CUMA) is pushing for a restructuring of the Independent System Operator (ISO). CUMA wants the ISO to be replaced by a publicly-owned non-profit entity, and has also called for a cap on wholesale power prices.

PG&E estimates that it has been losing $1m per hour since June due to high wholesale prices and the fact that it is not allowed to pass these increased costs on to retail consumers.

California’s third major utility, San Diego Gas & Electric (SDG&E) operates without a rate cap. Its retail customers have seen their utility bills rise up to threefold this summer.

Reliant sells interestsin Latin America

Reliant Energy has announced the sale of two of its interests in Latin America in line with plans, announced last year, to divest its assets in the region. The Houston-based firm has sold its stake in El Salvador Energy Holdings to AES Empresa Electrica de El Salvador, and its interest in Light Servços de Eletricidade to an AES-EDF joint venture.

Reliant wants to focus on expanding its competitive energy services businesses in the US and western Europe.

El Salvador Energy Holdings owns three electric distribution systems in El Salvador and represents Reliant’s entire interest in the country. Brazil’s Light is an electric generation and distribution company serving 2.9m customers in and around Rio de Janeiro.

The AES-EDF venture has acquired Reliant’s 11.68 per cent interest in Light for $430m. US-based AES will purchase 30 per cent of the shares to be sold and EDF of France the remainder. The same venture originally purchased an interest in Light in 1996.

Hydro-Quebec wins transco

Chilean power generation group Endesa de Chile has sold its transmission subsidiary Transelec to Hydro-Quebec International of Canada. Hydro-Quebec bid $1.08bn for Transelec, just above the minimum asking price.

Endesa will use funds generated by the sale to reduce its debt and improve its financial structure.

Transelec is Chile’s largest transmission company. Hydro-Quebec said that the transaction would allow it to consolidate its presence in Latin America and move on to other projects, especially in electricity transmission.

US fuel cell partnership breaks ground

A consortium of companies has joined forces to field test and bring to market fuel cell technology. The consortium broke ground on the Alabama Direct Fuel Cell Demonstration project in October.

The consortium comprises Southern Company, Alabama Municipal Electric Authority, FuelCell Energy and Mercedes-Benz US International. The four partners believe the project will help to drive the growing interest in fuel cell technology for power generation applications in the US and further afield.

The power plant will use FuelCell Energy’s Direct FuelCell stack in a unique design developed by MTU Friedrichshafen of Germany, which has a licensing agreement with FuelCell Energy.

The new power plant will run on pipeline natural gas and supply power to a Mercedes-Benz production facility in Alabama.

Utilities file RTO plans under FERC order

Several US utilities filed proposals with the Federal Energy Regulatory Commission (FERC) to establish Regional transmission Organizations (RTOs) in their service areas. The filings are in line with FERC requirements to create RTOs that would become operational by December 2001.

FERC’s goal is to ensure that all electricity suppliers have equal access to the transmission grid. The RTOs would be responsible for operating high voltage networks, although utilities would retain ownership of the lines.

In the northeast, nine utilities submitted plans for the creation of ‘RTO West’, while in Ohio, DPL Inc. submitted plans to join the Alliance RTO, which includes American Electric Power and Detroit Edison.