The California Energy Commission voted 4-0 to issue a license to build the Tesla Power Project, a 1,120-megawatt power plant near Tracy. The license was granted to Midway Power LLC, a subsidiary of Florida-based FPL Energy.

Last year, Calpine Corp. won Energy Commission approval to build a similar power plant, the 1,100-megawatt East Altamont Energy Center, near the community of Mountain House.

Whether the power plants are built, their backers say, depends in part on how California goes about restructuring the electricity market in the wake of the state's failed attempt at deregulation.

In an attempt to bring market efficiencies to what had been a heavily regulated market, lawmakers stripped public utilities of their power plants and

put power generation in the hands of private companies.

Experts say the experiment failed for a number of reasons, including frequent shortages of electricity, some manufactured by energy traders who were able to "game" the system to send prices skyrocketing.

Now, Gov. Arnold Schwarzenegger and the Legislature have put forward competing plans to harness the benefits of competition while protecting consumers from price gouging.

"I would say (Calpine wants to see) regulatory certainty, and part of that, from Calpine's perspective is that we have a fair, transparent market," said Calpine spokeswoman Katherine Potter. "Right now the system is in flux, and we don't have set rules."

Until those rules are drafted and Calpine has a customer for its electricity, it has no date for breaking ground on the East Altamont Energy Center, Potter said.

A spokesman for FPL Energy was optimistic that ground breaking for the Tesla Power Project could take place next year, in time for the project to be online in 2007.

"We're certainly in the same boat (as Calpine), but I do want to say we're coming out of this period of uncertainty, as opposed to a year ago when we were heading into it," said Scott A. Busa, project development manager for the Tesla Power Project.

Busa and Potter said they hope the state will restore the ability of independent generators to make deals directly with customers, such as private companies and cities banding together to buy power.

Pleasanton, for example, is studying the feasibility of buying its own power in partnership with other cities, a process known as "community aggregation."

Potter said Calpine has an arrangement to supply power to Safeway Corp., a contract that was grandfathered in under the state's first attempt at deregulation.

If built, the Calpine and FPL Energy power plants would be among the largest in the state.

While most power plants in urban areas have 100 to 500 megawatts of generating capacity, the sites chosen for Tesla and East Altamont are in an area of eastern Alameda County that's off limits to housing development.

One megawatt of generating capacity is enough to supply up to 750 to 1,000 homes.

So Tesla and East Altamont would each be able to supply power for more than 1 million people.

Although far from the cities where the electricity they produce would be consumed, the plants would be located near natural gas pipelines and high-voltage transmission wires used to transport power over long distances.

Both plants would use recycled water for cooling -- Calpine's will come from Mountain House, and the Tesla Power Project will use water from the city of Tracy.

The Tracy City Council approved a $72 million expansion of a sewage wastewater treatment plant that's designed to purify water to standards permitting it to be discharged into the Old River or piped to the Tesla power plant for cooling.

Tracy's director of public works, Nick Pinhey, said the city will resume negotiations with FPL Energy today on the terms of the water deal.

Although some have been critical that FPL Energy will be getting water for free, Pinhey said there are several benefits to the city. FPL Energy will pay the city an administrative surcharge, and build an 11-mile pipeline to deliver water to the plant. The pipeline also can be used to bring recycled water to Tracy's west side.

He said the power plant will need about 7 million gallons of water a day, while Tracy's treatment plant eventually will produce 9 million gallons a day.

Pinhey said the treatment plant is being built not for FPL Energy, but to meet stringent new standards by the Regional Water Quality Control Board for discharges to streams.

The site selected for the Tesla Power Project is a former cattle ranch near the intersection of Patterson Pass and Midway roads. The East Altamont Energy Center would be built on farmland between Byron Bethany and Kelso roads at the point where Alameda, Contra Costa and San Joaquin counties meet.

The remote locations of the two plants, coupled with the fact that regulators say most of their impacts will be felt in neighboring San Joaquin county, meant that few people took much interest in the licensing process.

Some who did -- including Tracy businessman Bob Sarvey and his wife, Susan -- said regulators failed to do enough to protect public health.

"My experience in this siting case is, (your position is) 'Whatever we have to do to license the plant,'" Susan Sarvey told the Energy Commission Wednesday. "I'm sure you're going to license the plant today, and God help all of us who live in Tracy."

Both plants were approved by the Bay Area Air Quality Management District. To offset the plant's impacts, the air district required the companies to use "best available" pollution controls and purchase of hundreds of tons of pollution credits from other industries.

Energy Commissioners noted that the state imposed additional requirements on the plant's operations to offset impacts in neighboring San Joaquin County. FPL Energy, for instance, would be required to pay for $1.6 million in air pollution reduction programs in the San Joaquin Valley, $600,000 of which is earmarked for programs in Tracy.