ERCOT

Calpine’s announcement that it will shed 20 of its 92 power plants, close three offices, and lay off 775 more staff in a bid to emerge from bankruptcy caused by more than $22 billion in total debt was not unexpected. The question is whether these actions will be sufficient to get the job done.

“I think it is my job as a leader to make sure that our values are always lived up to even when [they] conflict necessarily with our vision. That is what people look for at the end of the day. A leader’s role above all else is to make sure the truth is respected.”

When FERC opened wholesale power markets to competition a decade ago in Order No. 888, it codified a system for awarding grid access known as the pro forma Open-Access Transmission Tariff (OATT), founded on physical rights, and on the fiction that electrons travel along a “contract path.” Should the commission “tinker” with the OATT, making only surgical changes to make it current? Or, do events instead warrant a complete overhaul?

FERC, the ISO, and many other parties had seen no reason for further debate over the need for a location-specific capacity market. By limiting debate, FERC had foreclosed a raft of competing ideas. When the moment finally arrived for the oral argument at FERC, attorneys and witnesses attempted valiantly in the precious few minutes allotted each speaker to flesh out new ideas, and the commissioners struggled as well to keep up. This highly unusual situation made for a helter-skelter hearing, with new topics seeming to come out of the woodwork.

The past year has allowed the North American power sector to continue its recovery, but it has been a treacherous time for investing. Asset values, and the value of their associated debt instruments, are being driven in the short term by an extreme fuel market and in the long term by a back-to-basics mindset among electric utilities. Still, asset valuations in most markets are not yet at replacement costs, leaving current investors with a residual level of risk.

We talk with Cinergy’s James E. Rogers, DTE Energy’s Anthony F. Earley Jr., Constellation Energy’s Mayo A. Shattuck III, Xcel Energy’s Wayne H. Brunetti, FPL Group Inc.’s Lewis Hay III, and TXU’s C. John Wilder.