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Today's IssueAlert Sponsors:=20
e-ProCom for Utilities and Energy - March 20-22, 2001e-Commerce and=20 e-Business are concepts that offer the promise and expectation to deliver= =20 bottom line benefits, productivity enhancement, supply chain efficiencies a= nd=20 increased profitability to your business =01) but what does the e-revolutio= n=20 mean in today's real energy world?The answers can be found at the e-ProCom= =20 for Utilities & Energy e-Business Conference & Exhibition, which is being= =20 held at the Baltimore Convention in Baltimore, Maryland on March 20-22, 200= 1=20 with a focus on the key issues, options, and alternatives from an industry= =20 based perspective. Please call (713) 463-9595 to obtain more information or= =20 visit our web site at: www.e-procomseries.com The most comprehensive, up-to-date map of the North American Power System b= y=20 RDI/FT Energy is now available from SCIENTECH. The Wall Map measures 42" x= =20 72"; the Executive Map Set consists of 18 11" x 17" maps. Visit our website= =20 at www.ConsultRCI.com for a detailed description of these valuable maps and= =20 complete ordering instructions.=20 For advertising information, email Nancy Spring, or call (505)244-7613.=20 Editor's Note: Yesterday's IssueAlert incorrectly identified Las Cruces as= =20 the town used for an energy management pilot project. The correct town is= =20 Laredo, Texas. [IMAGE] IssueAlert for February 20, 2001=20 Florida Study Recommends Wholesale Deregulation by Will McNamara Director, Electric Industry Analysis Florida's political and business leaders moved cautiously toward deregulati= ng=20 the state's electric industry in a move last week, while vowing to avoid=20 problems such as those in California. Florida's Energy 2020 Study Commissio= n=20 unanimously recommended that the Florida Legislature consider deregulating= =20 wholesale electricity. The move could spark construction of a number of pow= er=20 plants in the state.=20 Analysis: Florida Gov. Jeb Bush created the Energy 2020 Study Commission wi= th=20 the intent of submitting an initial deregulation proposal for consideration= =20 in this spring's legislative session. Florida's energy market represents a= =20 $13 billion industry, so obviously there has been great interest on the par= t=20 of new energy suppliers that want to begin serving the state. =20 Florida continues to move slowly toward deregulation across all levels.=20 Competition on the retail side may take several more years, especially as t= he=20 California crisis is causing many states to adopt a more cautious approach = to=20 removing state regulations. The commission's recommendation to initiate=20 deregulation on the wholesale side is considered a small step toward reachi= ng=20 the ultimate goal of total deregulation in the state. =20 Specifically, the commission has endorsed a plan that would allow=20 out-of-state companies to build new merchant power plants in Florida and se= ll=20 wholesale electricity to the state's utilities. Florida law forbids=20 out-of-state electric utility companies from providing year-round service t= o=20 utilities and customers, but merchant plants can provide backup service to= =20 existing utilities when energy reserves are stretched thin, to avoid power= =20 outages and rolling brownouts. Also under the commission's plan, in-state= =20 utilities would also be allowed to sell their regulated plants at depreciat= ed=20 values to affiliated companies that would compete head-to-head on the=20 wholesale market. In addition, the state's utilities could engage in=20 long-term power contracts with suppliers instead of relying on the open=20 market (a major difference from California's original plan), and state=20 regulators would still review all wholesale contract prices. The commission= 's=20 plan must still be approved by the Florida Legislature, and the commission= =20 readily admits that approval may not be easily obtained due to the ongoing= =20 crisis in California.=20 At the present time, no official start date for electric competition in=20 Florida has been announced. The state's "go slow" approach is characteristi= c=20 of other Southeastern U.S. states, many of which continue to enjoy=20 comparatively low electric rates. Florida's renewed interest in deregulatio= n=20 is being driven by the belief among several commission members and other=20 officials that competition eventually will result in lower rates for=20 consumers. Or, at the very least, competition should prevent rates from=20 continuing to increase as they reportedly would under a regulated structure= .=20 The commission's plan also is intended to prevent power supply problems in= =20 Florida similar to those in California, by allowing for new generation to b= e=20 built in the state by external companies. Florida law requires power=20 companies to hold 20 percent of their power supplies in reserve to that the= y=20 can handle periods of extreme usage. However, both the commission's chair a= nd=20 Gov. Bush have suggested that Florida will face a shortage of electricity i= n=20 the next decade unless out-of-state companies build new plants. =20 Consumer groups and municipal electric providers have resisted the=20 commission's recommendation. In general, such groups fear that deregulating= =20 Florida's wholesale market would lead to higher electricity bills since big= =20 utilities in the state would be allowed to earn higher profits that may or= =20 may not result in benefits for consumers. In fact, the Florida Municipal=20 Electric Association recently argued that annual electricity prices in=20 Florida would rise by between $700 million and $1.6 billion if the=20 commission's plan to initiate wholesale deregulation is approved. In=20 addition, Florida's utilities have been rather effective in persuading stat= e=20 officials to move slowly toward deregulation, perhaps out of concern about= =20 losing their monopoly status. Walter Revell, the chairman of the Energy 202= 0=20 Study Commission, denied that the group is considering any plan that would = be=20 partial to the state's largest investor-owned utilities, which include=20 Florida Power & Light, Tampa Electric, Florida Power Corp. and Gulf Power. = =20 The commission's recommendation supports what is already a fast-growing=20 wholesale business in the state of Florida, with outside power companies su= ch=20 as Duke, Enron, Calpine Corp. and others aggressively trying to penetrate t= he=20 state and gain a foothold for when deregulation emerges in full force. Such= =20 power suppliers may be accurately surmising that Florida is headed toward a= =20 supply / demand imbalance, as has occurred in California. An imbalance of= =20 this sort would offer competitive opportunities for power suppliers in the= =20 state. According to a report in the St. Petersburg Times, merchant power=20 companies have announced plans to build some 20 plants across Florida just= =20 over the last year or so. However, the article stated that the Florida's bi= g=20 utility companies still have enough clout to block any plant proposal.=20 For instance, Florida Power, Florida Power & Light and Tampa Electric joine= d=20 forces last year to block Duke Energy from constructing a plant near Dayton= a=20 Beach. Yet, Duke pushes forward and recently said that it would revive plan= s=20 to build a merchant plant in New Smyrna Beach, Fla. Duke's plans to build t= he=20 plant had previously been blocked by a Florida Supreme Court ruling that su= ch=20 plants were prohibited under state law.=20 Enron unveiled plans for two "peaker" plants in Pompano and Deerfield Beach= ,=20 Fla., several weeks ago. Construction on both sites is pending city and sta= te=20 environmental department approval, but Enron hopes to have both 500 MW=20 facilities running by summer 2002. Enron expects the Department of=20 Environmental Protection to license each peaker plant for 125 days each yea= r,=20 with roughly 83 days powered by natural gas and the rest by oil. Enron is= =20 also in the preliminary stages of planning a 90-mile liquefied natural gas= =20 (LNG) pipeline between the Bahamas and Port Everglades, Fla. The company ha= s=20 an option on a 90-acre site in the harbor of Grand Bahamas Island, where it= =20 hopes to build a conversion and treatment terminal for LNG.=20 Calpine received approval to build a 529-MW natural gas-fired plant to supp= ly=20 electricity to Seminole Electric Cooperative. The plant will be part of the= =20 proposed Osprey Energy Center in Aurburndale, Fla., next to an existing=20 Calpine 150-MW cogeneration plant. According to Calpine, beginning in June= =20 2003, Seminole Electric Cooperative will distribute electricity from Osprey= =20 for 17 years to 10 member electric cooperatives. =20 Reliant Energy is also finding its own way to penetrate the new openings in= to=20 the Florida market. Just last week, Reliant Energy Services, an unregulated= =20 wholesale power subsidiary of Reliant Energy, announced that it has entered= =20 into agreements with affiliates of El Paso Energy Corp. to purchase future= =20 supplies of power from several new facilities to be built in Florida. Under= =20 the tolling agreements, Reliant Energy Services has secured the right to=20 utilize and dispatch electric generating capacity totaling approximately=20 1,100 MW. The electricity will be generated by two new natural-gas fired=20 simple-cycle peaking plants, to be owned by El Paso Energy, that will be=20 located in Pasco and Hardee counties. The new plants are scheduled to be=20 completed by the spring and summer of 2002. =20 These are just a few examples of the many companies that plan to take=20 competitive advantage of the anticipated opening of Florida's market. While= =20 Florida clearly has no plan to open deregulation on the consumer level any= =20 time soon, competition in the state does appear to be gaining momentum, at= =20 least on the wholesale level. Of course, the commission's plan has not yet= =20 been fully approved by the Florida Legislature, and critics claim that the= =20 state's big utilities still wield a great deal of influence over the extent= =20 to which competing power suppliers will be allowed to participate in the=20 state's market. There are many debatable nuances within the Florida=20 commission's plan. Yet, one positive thing is that Florida does appear to b= e=20 making valuable steps to increase its own power supply, addressing a proble= m=20 that many have accused California of ignoring. Having learned the lesson fr= om=20 California, Florida seemingly acknowledges that there is simply no guarante= e=20 that power will be readily available at tolerable price levels on the open= =20 market. Thus, this plan to increase the availability of power supply within= =20 the state through increased merchant plants seems to be a prudent approach.= =20 An archive list of previous IssueAlerts is available at www.ConsultRCI.com Reach thousands of utility analysts and decision makers every day. Your=20 company can schedule a sponsorship of IssueAlert by contacting Nancy Spring= =20 via e-mail or calling (505)244-7613. Advertising opportunities are also=20 available on our website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us=20 know if we can help you with in-depth analyses or any other SCIENTECH=20 information products. If you would like to refer a colleague to receive ou= r=20 free, daily IssueAlerts, please reply to this email and include their ful= l=20 name and email address or register directly on our site. =20 If you no longer wish to receive this daily email, send a message to=20 IssueAlert, and include the word "delete" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= =20 of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlert= s=20 are not intended to predict financial performance of companies discussed, = or=20 to be the basis for investment decisions of any kind. SCIENTECH's sole=20 purpose in publishing its IssueAlerts is to offer an independent perspecti= ve=20 regarding the key events occurring in the energy industry, based on its=20 long-standing reputation as an expert on energy issues. =20 Copyright 2001. SCIENTECH, Inc. All rights reserved.
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