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POWER CONTRACT AUCTION STILL MIRED IN DOUBT

Uncertainty prevails in California's ongoing auction of contracts for new energy capacity. State power regulators have not been able to reach a decision in connection with the Biennial Resource Plan Update (BRPU) process. Independent power producers and most wind companies back the process as it favours them. The utilities, for their part, want to avoid being locked into power purchases they say are too costly.

California's ongoing auction of contracts for new energy capacity auction is still mired in uncertainty. The state's power regulators remain unable to make a decision on what could amount to the California's largest wind installation in years.

Meanwhile Kenetech Windpower has announced that a compromise contract for 37.5 MW of wind power with Southern California Edison (SCE) will be immediately executed, if approved by regulators. It would replace capacity to have been provided through the Biennial Resource Plan Update (BRPU) energy auction process and is part of an agreement for a total of 495 MW of optional wind power.

Although the Kenetech agreement, worth $37.5 million, was announced November 8, SCE has said in the past it will not need additional wind power. The agreement is to replace the mandatory wind purchases under the BRPU, which would amount to far more wind installation -- as much as 585 MW, or one-third of California's total wind capacity -- over the next six years. The site for the 37.5 MW plant is not yet determined.

Yet again no decision was made on the BRPU by the California Public Utilities Commission (CPUC) when it met on November 9. The matter was delayed until December 7. But observers seem pessimistic that any decision will be made even then. Petitions had been filed in early October by SCE, FloWind Corp, San Diego Gas & Electric and Pacific Gas & Electric Co to overturn the entire complicated BRPU auction. Among other things, the pricing used by SeaWest and Kenetech is being questioned. The utilities also say they do not need more power.

The commissioners have simply been unable to agree on how to proceed on the BRPU. Independent power producers and most wind companies back the process as it favours them. The utilities, for their part, want to avoid being locked into power purchases they say are also too costly. If no BRPU decision is made this calendar year, it bodes less well for wind. Next year's CPUC chairman is more pro-utility, say commission-watchers.

In the deal announced with Kenetech, SCE says it would save $200 million as the agreement replaces about one-third of the BRPU mandated power purchase. Both parties are working on a so-called green pricing programme that would give customers the possibility of paying extra for wind if SCE decides to offer the option to customers.

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