Planned merchant capacity skyrockets

Washington, D.C.

The potential generating capacity from announced merchant power plants across the country has more than doubled in just one year, indicating that confidence in competitive markets is on the rise, reported the Electric Power Supply Association (EPSA)

“Where competition is increasing, the markets are growing and becoming more liquid. In the past year, eight states have passed retail competition legislation, paving the way for the announcement of significant new merchant capacity to meet increasing consumer demand,” said Lynne H. Church, EPSA`s executive director.

Merchant plants are generating stations financed by investors who are willing to accept market risks associated with their startup and operation. Unlike regulated power facilities, merchant plants receive no guaranteed rate of return and typically do not have long-term sales contracts.

Merchant plant capacity announcements recently reached 124,345 MW, up from 56,500 MW in October 1998, according to EPSA`s Announced Merchant Plant Matrix (see table).

“With the increasing number of merchant plants across the nation and the advent of retail competition in 24 states, they all must run more efficiently in order to successfully compete,” said Church. “Specifically, newer plants function more efficiently partly by using less fuel to produce the same output as older plants and releasing fewer emissions. In addition, they minimize the time needed for maintenance outages.”

As generation becomes less regulated, leading to the ongoing development of merchant plants and the sale of utility plants, competitive generators are expected to own and operate about 25 percent of the nation`s installed capacity by the end of 2001. This projection does not include generating facilities operated by unregulated utility affiliates within the utility`s own service territory.

EPSA regularly maintains its Announced Merchant Plant Matrix. For a copy, please contact Samantha Slater via e-mail at sslater@epsa.org or at 202-789-7200.

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