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CALIFORNIA / News and Insight on Business in the
Golden State

PG&E Putting 5 More Plants on the Market

January 15, 1998|CHRIS KRAUL | TIMES STAFF WRITER

Pacific Gas & Electric Co. is putting five more power plants worth $850 million on the market today, another sign of the shifting economics of power generation in the state's soon-to-be deregulated electricity industry.

The state's three investor-owned utilities--PG&E, Southern California Edison and San Diego Gas & Electric--have been ordered to sell at least half their fossil fuel-powered generation capacity, a measure the Legislature took to ensure that entrenched utilities would not exert too much influence in the free power market set to open up March 31.

But for a variety of reasons, the utilities are opting to sell most--and, in SDG&E's case, all--of their generation capacity, partly to simplify the transition to free markets and partly because the plants are fetching higher prices than anyone in the industry anticipated.

The plants PG&E is selling include mammoth gas-fired facilities in Pittsburg, Calif., and San Francisco and the Geysers geothermal complex in Sonoma County. All told, the five plants pack about 4,712 megawatts of generation capacity, or about one-third of the utility company's total.

PG&E Vice President Leslie Everett said she is hopeful that the plants will sell for at least 30% above their $850-million book value, the same premium that Duke Energy agreed to pay in November when it signed a $501-million deal for PG&E's plants in Morro Bay, Moss Landing and Oakland. The deal should close March 31.

The utility has made no decision, however, on whether to sell its hydroelectric and nuclear power plants.

PG&E's San Francisco-based parent is not getting out of fossil fuel power generation, only shifting future projects from the regulated utility to its unregulated affiliate called U.S. Generating.

In November, Edison said it had signed $1.12 billion in deals to sell 10 of its 12 fossil fuel plants. SDG&E has put its two gas-fired plants on the block and says it wants to sell its 20% interest in the San Onofre nuclear power station.

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