California ISO hoping to persuade Dynegy to keep plants running

San Francisco (Platts)--11Nov2004

The California Independent System Operator is reach a reliability-must-run
(RMR) contract with Dynegy next year to ensure the company's El Segundo Units
3 and 4, with a combined capacity of more than 650 MW, are available to help
the state meet demand next summer, Jim McIntosh, the ISO's director of grid
operations, told the ISO board Wednesday. McIntosh said Dynegy informed the
ISO last month that it plans to shut the units because of weak wholesale power
prices, but Southern California Edison and the ISO determined that they are
critical to reliability in the Los Angeles Basin. Dynegy could not be reached
for comment. Under RMR contracts, the ISO pays operators to keep capacity
on-line for reliability reasons. The agreements have become increasingly
important, McIntosh said, in Southern California, where summer capacity is
especially tight. McIntosh pointed to the California Energy Commission's 2004
Integrated Energy Policy Report Update, which warned the region's power
reserves could fall to dangerous levels even under normal summer conditions.

In response, the ISO, CEC, the state Public Utilities Commission and the
governor's office have formed the Joint Energy Action Forum, he said. Among
the options the group is considering is delaying the scheduled retirement of
some 676 MW of aging capacity and and accelerating the construction of 500 MW
of new generation, he said. In addition, the group is working to get access to
400 MW of excess power from municipal utilities outside of the ISO's system
and is pushing for 1,300 MW of transmission improvements, McIntosh said. At
Wednesday's meeting, Greg Cook, the ISO's manager of market monitoring, said
intrazonal congestion has cost the state nearly $300-mil so far this year.
Cook said that power imports from the Southwest during peak load period and
off-peak wheeling to the Northwest have resulted in the highest interzonal
congestion costs since 2002. September 2004, which was the most expensive
month, saw these costs of nearly $9-mil, compared with less than $2-mil in the
same month last year.

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