Power industry deregulation affecting coal-fired generation

Washington (Platts)--20Jun2006

As new baseload capacity needs to come online to meet the growing energy needs
in the US, one industry leader says deregulation is part of the reason new
coal-fired generation isn't being built.

"Many companies are not regulated and can't put the cost of the new plant in
the rate base," PPL President and Chief Operating Officer James Miller told
Platts on Monday.

"A deregulated company that wants to build a coal plant has no assurance that
it can recoup costs of that plant," Miller said during a panel discussion on
the challenges of building new generation at the Edison Electric Institute's
annual convention in Washington.

"[Companies] are taking a risk on a $1 billion investment. They are betting
that five and a half years later they can get a price for selling that power
sufficient enough to give their shareholders a return they demand," Miller
told Platts.

"In a regulated world, it's different. You get rate recovery. Once you get
approval to build a plant, you also get assurance of a proper return on your
investment. When I look at problems to getting new coal generation built, a
lot of it is because of the deregulated markets," Miller said.

"It takes five or six years for permitting, contracts and construction just to
get a plant started," Miller said. "I tend not to think of it as a national
crisis right now, but if I knew that next year we will be digging and pouring
the concrete for a new coal plant, I might feel a little better. But, I'm not
seeing any signals that show me we will have multiple new plants going up any
time soon."

-- Regina Johnson, regina_johnson@platts.com


 

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